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Author: 


Racine,  Samuel  Frederick 


Title: 


Practical  problems  graded 
3V. 

Place: 

[Seattle] 

Date: 

[1 920] 


MASTER   NEGATIVE  * 


COLUMBIA  UNIVERSITY  LIBRARIES 
PRESERVATION 

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Racine,  Sanuel  Frederick,  1882- 

Practioal  problems  graded...  By  SamUel  F. 

Racine...  ^Seattle,  cl920n 

3  ▼,   27g  on,   ^Aooounting  students'  series i 

Contents.— V.  1,  Series  "A".— v.  2,  Series  "D". 
—  V,  3.  Series  "C". 


» 


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Practical  problems  graded...3V, 


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Practical  Problems 

Graded 


Series  "A" 


BY 


Samuel  F.  Racine 

Certified  Public  Accountant 


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Practical  Problems 

Graded 


Series  "A" 


BY 


Samuel  F.  Racine 

Certified  Public  Accountant 


/ 


COPYRIGHT  1916 

BY 

SAMUEL  F.  RACINE 


COPYRIGHT  1920 

BY 

SAMUEL  F.  RACINE 


3 


MD 


« 

^ 


PUBLISHED  BY 

THE  WESTERN   INSTITUTE  OF  ACCOUNTANCY, 
COMMERCE  AND  FINANCE 

LEARY  BLDG.  SEATTLE,  WASH. 


"^ 


Accounting  Students'  Series 

Graded  Corporation  Problems,  1914  and  1918;  containing 
the  most  severe  C.  P  A.  examination  problems  used  up  to  the 
year  of  publication,  1914 ;  since  revised  and  brought  down  to 
date,  1918. 

Guide  to  the  Study  of  Accounting,  1916;  similar  to  the 
preceding  Guide  to  the  Study  to  Accounting,  but  practically  a  new 
book,  owing  to  the  advent  of  new  books  of  recognized  authority. 

Guide  to  the  Study  of  Auditing,  1916.  The  publication  of 
a  new  Montgomery's  Auditing  required  that  the  original  Guide  to 
Auditing  be  rewritten,  hence  the  1916  book. 

Accounting  Principles,  1917.  A  new  book  originally  writ- 
ten in  1913,  containing  much  subject  matter  not  found  in  other 
books  on  accounting.  Assuredly  it  contains  more  information 
than  any  other  single  book  on  the  subject. 

Annuity  Studies,  1918 ;  a  set  of  rules  easy  to  understand, 
with  problems  on  annuities. 

Syllabus  of  Bookkeeping,  1918.  As  with  all  of  Mr.  Racine's 
books,  originality  is  the  keynote  of  the  Syllabus  of  Bookkeeping. 
There  is  nothing  else  like  it  in  print.  It  is  hoped  that  it  will 
simplify  the  method  of  instruction  in  bookkeeping  to  an  extent 
not  considered  possible  by  other  instructors  of  the  present  day. 
It  is  designed  to  combine  the  advantages  of  lectures  with  the  other 
usual  methods  of  bookkeeping  instruction  and  is  proving  a  decided 
success  in  the  class  rooms  of  The  Western  Institute  of  Account- 
ancy, Commerce  and  Finance. 


PRACTICAL   PROBLEMS,  GRADED,  SERIES  A 


Code  :    Cab 

"A"  and  "B"  agree  to  dissolve  partnership  December  31. 
1908.    The  stated  balance  sheet  was  as  follows : 


Assets 

Merchandise  Inventory  $  57,500 

Furniture   and   Fixtures 2,000 

Accounts  Receivable  85,500 

Bills    Receivable    (discounted)  14,000 

Goodwill  5,000 


$    164,000 


Liabilities 

Accounts  Payable  $  50,000 

Bank   2,500 

Bills  Payable  11,500 

Bills    Receivable    (discounted)  14,000 

"A's"  Capital  Account 53,500 

"B's"  Capital   Account 17,500 

Income  Account  15,000 

$  164,000 


Profits  are  divisible,  "A"  4-7,  and  "B"  3-7,  five  per  cent  being 
allowed  on  capital,  and  no  interest  charged  on  drawings,  which 
were  upon  the  basis  of  $2,500.00  each.  "A"  continues  the  business 
and  assumes  all  liabilities.  "B,"  opening  up  business  elsewhere 
takes  one-fourth  of  the  stock  and  agrees  to  leave  in  the  business 
$2,500  as  a  guarantee  for  one  year  against  floating  liability  for 
bad  debts  and  discounted  merchandise  notes,  and  to  receive  or  pay 
any  balance  in  cash,  any  amount  received  being  derived  from  ac- 
counts due  the  firm. 

Prepare  "A's"  balance  sheet  after  dissolution  expressive  of 
the  terms  stated. 


•« 


Code:    Cabin 

The  Energy  Manufacturing  Co.  draws  on  its  customer,  Slo- 
pay  &  Company,  at  two  months  from  date,  January  1,  1910,  for 
$5,000.00,  and  three  days  thereafter  discounts  the  draft  with  the 
City  National  Bank  at  five  per  cent  per  annum  net. 

At  maturity  S.  &  Co.  confess  they  cannot  meet  the  draft,  but 
pay  the  E.  Mfg.  Co.  $3,000.00  on  account,  and  give  an  acceptance 
for  a  like  period  for  the  balance,  upon  condition  that  the  E.  Mfg. 
Co.  retire  the  original  draft,  which  is  done. 

Detail  serially  the  entries  by  which  the  E.  Mfg.  Co.  should 
record  these  transactions  on  its  books. 


PRACTICAL  PROBLEMS,.  GRADED,  SERIES  A 


Code :    Cable 

The  ledger  balances  of  the  accounts  of  John  Smith  at  Decem- 
ber 31st,  1910,  are  as  follows : 

Accounts  Receivable  $    5,140.00 

Accounts  Payable  2,692.00 

Bills  Payable  658.00 

Bills   Receivable 217.00 

Loan  Advanced  by  J.  Smith  500.00 

Cash  on  Hand  44.00 

Bank  Overdraft  1,065.00 

Inventory,  January  1st,  1910 3,020.00 

Purchases   7,386.00 

Sales  16,406.00 

Wages    4,839.00 

Office  Salaries  .*. 1,045.00 

Traveling  Expenses  503.00 

Interest  Paid  : 173.00 

Stationery  284.00 

Rent,  Taxes  and  Insurance  222.00 

Discounts  and  Allowances 258.00 

Machinery  Expense  and  Fuel 264.00 

Freight  206.00 

Incidental  Expenses 151.00 

Commissions    50.00 

Rents  Received  329.00 

Capital  3,249.00 

Bad  Debts 97.00 

$  48,798.00 

Rent,  $200.00  a  year  is  charged  to  September  30th,  1910; 
repairs  to  engine  estimated  at  $90.00,  account  not  yet  received. 
Inventory  estimated  at  $4,000.00. 

Provide  2i/2  per  cent  on  account  receivable  for  discounts,  also 

$150.00  for  estimated  loss  by  bad  debts,  and  $20.00  for  interest 
accrued  on  loan. 

Prepare  Trading  and  Profit  and  Loss  Account,  and  Balance 
Sheet  as  at  December  31st,  1910. 


t* 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  A 


Code  :   Cage 

Anderson  &  Brooks  are  equal  partners.    Their  balance  sheet 
on  June  30,  1910,  was  as  follows : 


I* 


Assets 

Merchandise    Inventory    $  35,000 

Accounts  Receivable  61,000 

Furniture  and   Fixtures 2,500 

Cash 500 

Investments  „ 9,000 


Liabilities 

Accounts   Payable   $  60,000 

Bank  Overdraft  16,000 

Anderson's   Capital   21,000 

Brooks'    Capital   16,000 


$    102,000 


%    102,000 


Conway  is  to  enter  the  firm ;  preliminary  thereto  Anderson  & 
Brooks  revise  their  balance  sheet  by  writing  off  $15,000.00  for 
bad  debts,  $500.00  from  furniture  and  fixtures,  15  per  cent  from 
inventory,  25  per  cent  for  loss  on  investments,  and  establish  a 
goodwill  account  of  $5,000.00. 

Conway  pays  in  $5,000.00  as  his  one-third  interest,  to  which 
amount  the  other  parties  agree  respectively  to  adjust  their  capital. 

Give  the  starting  balance  sheet  of  the  new  firm. 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  A 


Code:    Caliber 

A  firm  of  three  partners  with  equal  capital  and  interest  oper- 
ates for  three  years,  when  the  junior  withdraws. 

The  partnership  agreement  provides  that  a  retiring  partner 
shall,  in  addition  to  his  capital  and  share  of  profits,  receive  by  way 
of  goodwill  two  years*  purchase  of  his  share  of  the  average  profits 
shown  for  the  three  years  next  preceding  the  date  of  withdrawal. 

Make  out  a  Balance  Sheet,  Profit  and  Loss  Account  and  an 
account  with  the  retiring  partner  as  of  June  30,  1911,  from  the 
following  memorandum  handed  to  you  with  your  instructions,  on 
September  3,  1911,  allowing  for  the  depreciation  of  plant  account 
5%,  on  leasehold  account  15%,  and  for  discount  and  possible  loss 
on  accounts  receivable  10%. 

The  profits  for  the  two  previous  years  were  respectively 
$44,540.00  and  $55,050.00. 

Capital  $  60,000.00 

Plant,  Tools  and  Equipment  37,100.00 

Leasehold   11,250.00 

Merchandise  Inventory — July  1,  '10  (Net  after  de- 
ducting reserve  of  $13,470.00) 12,000.00 

Merchandise  Inventory— June  30,  1911 19,000.00 

Accounts  Receivable 48,500.00 

Accounts  Payable  46,975.00 

Merchandise  Sales  137,970.00 

Merchandise  Purchases  69,510.00 

Wages 11,500.00 

General  Expense 3,900.00 

Bank  9,935.00 

"A's"  Drawing  Account  13,750.00 

"B's"  Drawing  Account  13,750.00 

"C's"  Drawing  Account  13,750.00 

The  reserve  against  the  merchandise  stock  which  was  of  a 
very  perishable  nature,  was  found  in  the  final  settlement  of  the  ac- 
counts with  the  retiring  partner  not  to  be  required. 


i« 


•» 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  A 

Code  :    Calm 

A  Water  Company  finds  it  necessary  to  renew  a  line  of 
service  mains  which  cost  $50,000.00  seven  years  ago.  Double 
capacity  is  now  advisable  for  which  the  outlay  will  be  $80,000.00. 
Depreciation  at  10%  per  annum  has  been  regularly  charged  on  the 
first  installation. 

Draft  the  necessary  journal  entries  to  meet  the  essential  facts. 


Code  :   Canal 

A  firm  desires  to  transfer  its  property  to  a  corporation  duly 
organized  to  carry  on  the  business.  The  net  assets  of  the  firm 
consist  of  the  following: 

Lands  and  Buildings  ^ $150,000.00 

Inventory    100,000.00 

Accounts  Receivable  150,000.00 

Goodwill  and  Patents  100,00000 

Cash  50,000.00 

$550,000.00 

It  is  proposed  to  issue  in  full  payment  therefore,  bonds,  pre- 
ferred stock,  and  common  stock  aggregating  the  sum  of  $500,- 
000,  of  which  each  partner  is  to  receive  his  proportionate  share 
according  to  his  interest  in  the  firm,  viz :  Jones,  60%  ;  Brown, 
25%,  and  Smith  15%. 

(a)  Prepare  opening  entries  for  the  new  company. 

(b)  Prepare  a  statement  of  assets  and  liabilities. 

(c)  State  what  amount  of  each  class  of  securities  each  of  the 
partners  should  receive. 


•» 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  A 

Code  :    Cane 

"A,"  "B"  and  "C"  were  partners  and  contributed  the  follow- 
ing capital:  "A"  $8,000,  "B"  $6,000,  and  "C"  $4,000.  Profits 
and  losses  were  to  be  borne  equally.  At  the  end  of  the  first  year 
each  partner  had  drawn  $1,000.  The  assets  were  then  disposed 
of  for  $3,000,  the  purchaser  discharging  all  the  liabilities  of  the 
firm.  How  should  this  sum  of  $3,000  be  apportioned  among  the 
partners  and  would  any  of  them  have  to  advance  any  further  sum  ? 
If  so,  state  which  partner  and  how  much  and  make  up  the  neces- 
sary accounts  to  show  the  results. 


Code  :    Canter 

A  malting  company  was  placed  in  the  hands  of  a  Receiver  in 
Bankruptcy.    The  assets  inventoried  by  the  Receiver  were : 

Accounts  Receivable  $218,477.15 

Grain  and  Products  in  Malt  House 29,359.74 

An  order  of  the  court  was  entered  instructing  the  Receiver  to 
continue  the  operation  of  the  business.  After  the  Receiver  had 
operated  the  business  two  months,  a  settlement  was  eflfected,  and 
the  Receiver  discharged  by  the  court,  the  bankrupt  company  re- 
suming business.  The  Receiver's  books  of  the  bankrupt  com- 
pany's accounts  showed  at  the  date  of  his  discharge : 

Collections  on  account  of  the  accounts  receivable  inventoried 
above,  $10,097.60;  they  showed  that  in  trade  the  Receivers  had 
made  gross  sales  to  the  amount  of  $114,806.62  ;  his  grain  purchases 
were  $110,786.61;  manufacturing  expenses  $7,279.07;  selling  ex- 
penses, $7,956.97;  Receiver's  charges  $1,000.00;  discounts,  short- 
ages and  merchandise  returned  $1,370.85 ;  on  hand  in  grain  and 
products  $51,005.62;  he  has  collected  in  cash  on  Receiver's  sales 
$65,448.83 ;  he  owes  an  open  account  $5,237.52 ;  borrowed  from 
banks  $+6,251.10. 

Prepare  trading  statement  showing  profit  or  loss  from  Re- 
ceiver's operations,  and  prepare  final  balance  sheet  statement  from 
the  face  of  the  Receiver's  accounts  of  the  bankrupt  company  at 
the  close  of  the  receivership. 


PRACTICAL   PROBLEMS,  GRADED,  SERIES  A 

Code:    Capital 

Brown  and  Jones  begin  a  partnership  business  Jan.  1st,  1902 ; 
at  the  time  of  closing  the  books,  Dec.  31,  1902,  an  examination 
of  the  account  revealed  the  following : 

January  1st  Brown  paid  in 4  9,000.00 

May  1st  Brown  paid  in 2,400.00 

June  1st  Brown  drew  out    1,800.00 

September  1st  Brown  drew  out 2,000.00 

October  1st  Brown  paid  in 800.00 

January  1st  Jones  paid  in 3,000.00 

March  1st  Jones  drew  out 1,600.00 

May  1st  Jones  drew  out 1,200.00 

June  1st  Jones  paid  in 1,500.00 

October  1st  Jones  paid  in 3,000.00 

Their  merchandise  account  was  Dr.  $32,000.00,  Cr.  $27,000.00 
balance  of  merchandise  on  hand  per  inventory  $10,500.00.  Cash 
on  hand  $4,900.00.  Bills  receivable  $12,400.00 ;  Chas.  Green  owes 
on  account  $250.00 ;  F.  Reaper  owes  $700.00 ;  Wm.  Clark  owes 
$650.00 ;  F.  Hart  owes  $850.00.  They  owe  on  their  notes  $1,- 
890.00.  They  owe  A.  Reed  on  account  $240.00 ;  owe  C.  Smith 
$500.00;  owe  A.  Clark  $100.00.  Their  profit  and  loss  account 
shows  before  closing  entries.  Dr.  $866.00 ;  Cr.  $1,520.00 ;  expense 
account  is  Dr.  $2,520.00.  Commission  account  is  Cr.  $2,760.00; 
interest  is  Dr.  $480.00;  Cr.  $950.00.  The  gain  or  loss  is  to  be 
divided  in  proportion  to  each  partner's  capital,  and  in  proportion 
to  the  time  it  was  invested. 

Prepare  (1)  Asset  and  liability  statement.  (2)  Merchandise 
account  closed.  (3)  Profit  and  loss  account  closed.  (4)  Each 
partner's  account  closed.     (5)  Balance  sheet. 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  A 

Code  :    Car 

A  firm  of  four  partners  agreed  to  sell  their  business  to  a 
corporation.  Their  assets  and  liabilities  were  as  follows :  No.  1 — 
Capital  $145,500.00;  No.  2— Capital  $123,500.00;  No.  3— Capital 
$153,000.00;  No.  4— $152,330.00;  Building  $125,000.00;  Machin- 
ery, fixtures,  etc.,  $38,335.00;  Stock  $150,940.00;  Accounts  re- 
ceivable $328,680.00  ;  Bills  receivable  $37,005.00 ;  Cash  $17,030.00 ; 
Horses  and  wagons  $1,230.00 ;  Unexpired  insurance  $175.00 ;  Ac- 
counts payable  $124,065.00. 

It  was  further  agreed  that  the  partners  were  to  be  paid  for 
goodwill,  based  on  a  year  and  a  quarter  purchase  of  the  last  three 
years'  profits,  which  were  respectively  $32,620.00,  $37,450.00  and 
$50,650.00. 

Prepare  a  balance  sheet,  bringing  in  the  goodwill  as  an  asset 
and  distributing  it  equally  among  the  four. 


Code  :    Card 

At  the  close  of  its  fiscal  year,  December  31st,  1902,  a  manu- 
facturing corporation  had  a  working  capital  of  $86,451.78  consist- 
ing of — Cash  in  bank  $5,200.00;  accounts  and  note  receivable 
$79,516.80;  stock  on  hand  $30,483.20;  less  unpaid  labor  and  ac- 
counts payable  $28,748.22.  During  the  year  1903,  the  manage- 
ment erected  as  an  addition  to  its  main  factory,  a  building  costing 
$18,210.11)  and  installed  therein  machinery  and  equipment  costing 
$16,309.27,  with  additional  hand  tools  costing  $3,298.50.  After 
inventorying  stock  and  closing  the  books  to  December  31st,  1903, 
a  dividend  of  $45,000.00  was  declared,  out  of  net  profits  for  the 
year,  amounting  to  $54,817.96.  The  company  was  obliged  to 
borrow  money  to  pay  the  dividend. 

Give  any  reasons  which  occur  to  you  as  to  why  the  loan  was 
necessary  and  the  propriety,  or  otherwise,  of  making  it. 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  A 


Code  :   Carp 

"M."  "F."  commenced  business  January  1,  1913,  and  early 
in  February  handed  you  his  Day  Book  with  the  following  entries 
in  it  and  requested  you  to  open  a  set  of  Double  Entry  Books 
and  submit  a  Trial  Balance  as  of  the  close  of  business  January 
31,  1913.    Draft  the  Trial  Balance. 

Jan.  1  Commenced  tuisiness  with  cash  capital $  12,500.00 

"    1  Deposited  in  bank 11,750.00 

"    3  Bought  merchandise  from  Jas.  Harrison  &  Co 2,700.00 

"    3  Sold  goods  to  Wm.  Adams 2,400.00 

"    7  Bought  merchandise  from  W.  Smith  &  Co 3,225.00 

"    8  Paid  wages  in  cash 40.00 

"    8  Sold  goods  to  H.  Allan  &  Co 2,675.00 

"  10  Received  check  from  Wm.  Adams  (discount  $60.00) 2,340.00 

"  11  Paid  Jas.  Harrison  &  Co.  by  check  (discount  $135.00)....  2,565.00 

"  12  Paid  by  cash,  3  months  rent 200.00 

"  13  Bought  merchandise  from  H.  Kershaw 3,700.00 

"  15  Paid  wages  in  cash 40.00 

"  15  Paid  office  expenses  in  cash 35.00 

"  17  Sold  goods  to  H.  Hobson , 1,600.00 

"  19  Sold  goods  to  Wm.^  Adams :. 800.00 

"  21  Sold  goods  to  H.  Allan  &  Co 1,250.00 

"  22  Paid  wages  in  cash 40.00 

"  22  Paid  office  expenses  in  cash 25.00 

"  25  Paid  W.  Smith  &  Co.  by  check  (discount  $160.00) 3,065.00 

"  26  Received  check  from  H.  Allan  &  Co.  (discount  $75.00)....  2,600.00 

"  26  Bank  deposit 2,600.00 

"  29  Paid  wages  in  cash 40.00 

*'  29  Paid  office  expenses  in  cash 20.00 

There  was  $175.00  cash  on  hand  at  the  close  of  the  month, 
the  balance  being  "M."  "F.'s"  personal  expenditures. 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  A 


Code  :    Carry 

A  Single  Entry  set  of  books  for  1912  are  sent  to  you  with  an 
order  to  state  a  Profit  and  Loss  Account  for  the  year  and  a  Balance 
Sheet  as  at  December  31. 

The  starting  capital  was  $34,500.00. 

The  accounts  receivable Jan.  1 

payable   "  " 

"     merchandise  "  " 

plant  and  machinery "  " 

"     furniture   and  fixtures "  " 


$26,500.00 

7,500.00 

8,500.00 

10,000.00 

700.00 


Dec. 


31 


$44,000.00 

9,750.00 

9,500.00 

10,000.00 

700.00 


A  summary  of  the  Cash  Book  for  the  year  shows  as  follows : 
Received— Accounts   receivable,  $30,000.00;  capital  paid  in,  $2,500.00 
Disbursed— Bank  overdraft  Jan.  1,  $3,700.00;  accounts  payable,  $12,500.00 
general  expense,  $5,000.00;  wages,  $7,750.00;  personal  account,  $1,500.00 
leaving  a  bank  account  of  $2,000.00  and  currency  on  hand,  $50.00. 

Provide  5%  interest  on  Capital,  disregarding  additions  during 
the  year  and  personal  drafts ;  deduct  10%  for  plant  and  machinery 
depreciation,  5%  for  furniture  and  fixtures,  and  5%  for  bad  debt 
reserve. 


Code  :    Case 

Prepare  a  statement  of  the  affairs  of  Messrs.  Wilson  &  Com- 
pany from  the  following  figures  : 

Cash  on  hand,  $50.00.  Debtors,  good,  $2,500.00.  Debtors, 
bad,  $250.00.  Debtors,  doubtful,  $5,000.00,  which  are  estimated 
to  realize  $3,750.00.  Creditors,  unsecured,  $13,000.00.  Creditors, 
partially  secured,  $6,000.00 ;  estimated  value  of  security,  $4,000.00. 
Creditors,  fully  secured,  $9,500.00,  estimated  value  of  security, 
$12,000.00.  Landlord,  creditor  for  rent,  $1,350.00,  of  which  sum 
he  is  a  preferred. creditor  for  $1,200.00.  Factory  manager,  credi- 
tor for  salary,  $750.00,  of  which  sum  he  is  a  preferred  creditor 
for  $250.00.  Liabilities  on  notes  discounted,  $3,250.00,  all  of 
which  are  expected  to  be  duly  met  at  maturity.  Stock  of  mer- 
chandise cost  $4,250.00,  estimated  to  realize  $3,750.00.  Interest  in 
a  lease  of  business  premises  estimated  to  be  worth  $900.00.  There 
is  a  liability  in  respect  of  a  contract  which  the  debtors  cannot  com- 
plete, owing  to  the  failure,  amount  unknown,  but  estimated  at 
$1,500.00.  Bills  Receivable  on  hand,  $375.00,  estimated  to  pro- 
duce $100.00. 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  A 


Code  :   Castle 

Under  the  laws  of  the  State  of  Maine,  certain  companies 
were  taken  over  by  a  newly  organized  corporation  which  bought 
their  entire  assets  and  conducted  the  business  for  several  months 
before  it  was  discovered  that  the  inventories  upon  which  the 
transaction  was  first  based  were  overstated  to  the  extent  of 
$10,000  in  the  case  of  one  of  the  constituent  companies  by  reason 
of  a  clerical  error.  It  was  further  found  that  it  would  be  im- 
practicable to  recover  said  $10,000,  or  any  portion  of  it,  from 
any  of  the  original  companies,  or  from  any  of  the  original  stock- 
holders. 

The  balance  sheet  of  the  Maine  corporation,  prior  to  the  dis- 
covery of  the  error  in  inventory,  was  as  follows : 

Plant - $268,137.00 

Goodwill  and  Patents  28,967.49 

Cash  5,638.35 

Bills  Receivable  13,282.22 

Accounts  Receivable  117,203.88 

Inventories  232,751.42    $665,980.36 

Capital  Stock  $500,000.00 

Accounts  Payable 22,684.26 

Bills  Payable  102,000.00 

Surplus    41,296.10    $665,980.36 

What  entries  would  the  bookkeeper  be  justified  in  making  to 
adjust  the  accounts?    Give  reasons  for  your  answer. 


Code  :    Catalogue 

In  connection  with  your  general  merchandise  business,  you 
are  a  managing  partner  on  a  joint  account,  where  your  one-half 
of  merchandise  cost  was  $15,000.00.  Charges  posted  $150.00; 
Total  Sales  $8,000.00,  and  Joint  Unsold  Merchandise  $13,500.00. 
Settlement  charges  were:  Storage  $(>0.00;  Commission  5%  on 
Sales. 

Prepare  ledger  account,  and  show  journal  entries  closing  the 
account  on  your  books,  you  giving  your  partner,  Robert  Bailey, 
your  note  for  his  one-half  of  net  proceeds. 

Suppose  your  one-half  first  cost  was  $10,000.00.  Charges 
were  $9,000.00 ;  Sales  $4,500.00 ;  Storage  $20.00 ;  Joint  Property 
unsold  $2,100.00;  Commission  5%. 

Prepare  ledger  account,  and  show  journal  entries  closing  the 
account  on  your  books,  charging  Bailey  with  his  share  of  the 
deficiency. 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  A 


Code:   Cater 

The  books  of  a  manufacturing  corporation  at  the  close  of  its 
first  year's  business  show  sales  $241,863.50;  returns  and  allow- 
ances $18,416.38;  merchandise  cash  discounts  $13,943.87;  mer- 
chandise debit  balance  $69,346.92 ;  labor  $52,815.33 ;  fuel  $16,- 
219.46 ;  shop  expense  $9,247.50 ;  salaries  $16,214.30 ;  general  ex- 
penses $8,342.35 ;  advertising  $52,371.39 ;  traveling  expenses  $4,- 
364.28 ;  insurance  and  taxes  $6,250.00.  The  inventory  figures  up 
a  total  of  $13,896.12,  and  before  the  books  are  closed,  a  sufficient 
sum  for  depreciation,  namely  $5,000.00  is  written  off.  The  com- 
pany claims  that  conservatively  stated  its  net  profit  for  the  year 
is  $18,142.10. 

Arrange  the  amounts  in  the  form  of  a  profit  and  loss  account, 
and  explain  fully  how  the  company  could  arrive  at  such  a  net 
profit,  also  give  reasons  therefor. 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  A 


Code  :    Caustic 

On  June  1,  1916,  Wm.  Smith  bought  a  small  manufacturing 
business  for  a  cash  consideration  of  $25,000.00.  He  received  the 
following  assets  free  and  clear  of  all  liabilities : 

Machinery  which  cost  $15,000.00  and  which  was  considered 
as  worth  $12,000.00;  lumber  which  cost  $5,000.00  and  which 
would  be  worth  $6,000.00  at  the  market  prices  then  prevailing; 
Other  raw  material  which  was  worth  $2,000.00  at  cost  and  at 
market. 

Mr.  Smith  was  not  to  receive  any  interest  in  the  accounts 
receivable,  which  had  a  total  face  value  of  $8,000.00,  but,  as  an 
accommodation,  he  undertook  to  collect  them  for  the  former 
owners,  and  by  agreement  he  was  to  make  an  accounting  to  them 
on  August  1,  1916. 

Between  June  1  and  August  1,  1916,  no  regular  books  were 
kept,  and  at  the  latter  date  Mr.  Smith  asks  you  to  open  a  simple 
set  of  books  which  will  record  the  totals  of  his  transactions  to 
date.  He  also  asks  you  to  prepare  a  Balance  Sheet  and  a  state- 
ment to  be  submitted  to  the  former  owners. 

He  is  able  to  supply  you  with  the  following  information 
from  memoranda  he  has  kept : 

Cash  Collections — On  Old  Accounts  Rceivable $  6,500.00 

On  New  Accounts  Receivable 6,000.00 

Cash  Disbursements— Wages  2,000.00 

Other  Factory  Expenses  300.00 

Paid  former  owners,  on  account 3,000.00 

Collection  expenses  on  old  accounts 50.00 

Material  Purchases  6,000.00 

Open  items  at  August  1,  1916 — 

Old  accounts  receivable  uncollected 1,350.00 

New  accounts  receivable  uncollected 6,925.00 

Factory  expenses  unpaid  125.00 

Material  bills  unpaid  1,700.00 

Cash  on  Hand— August  1,  1916 725.00 

Material  on  hand  August  1,  1916 — at  market  price  $4,800— at  cost  5,500.00 

From  the  above  information,  prepare  the  journal  entries 
necessary  to  record  the  transactions  to  date ;  also  a  Balance  Sheet 
as  at  August  1,  1916. 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  A 


Code:    Cell 

The  Cinema  Company,  leasing  moving  picture  machines  for 
theaters,  has  1,000  machines  in  operation.  On  January  1,  1915, 
the  company  decides  to  increase  the  number  of  its  machines  80% 
and  places  an  order  with  the  manufacturers  of  the  machines,  who 
agree  to  complete  and  deliver  the  new  machines  in  equal  quar- 
terly instalments.  The  company  arranges  to  borrow  $60,000,  by 
the  sale  of  five  year  (i%  notes,  it  being  agreed  that  a  sum  equal 
to  20%  of  the  total  issue  shall  be  set  aside  annually  out  of  the 
profits  of  the  company  for  the  redemption  of  such  notes.  The 
average  annual  cost  for  maintenance  was  found  to  be  $120  per 
machine  and  $24,880  was  estimated  for  other  expenses. 

What  annual  charge  per  machine  would  the  company  have  to 
make  in  order  to  meet  its  obligations  and  pay  a  dividend  of  10% 
on  $200,000  of  its  capital  stock? 


Code  :    Central 

The  Wilson  Company  publish  a  magazine  which  is  issued  on 
the  15th  of  the  month.  They  contract  for  the  printing  and  bind- 
ing and  make  equal  semimonthly  payments  to  the  contractor. 

A  summary  of  their  transactions  from  October  15  to  December 
30,  1914,  is  as  follows:  Payments  on  printing  and  binding  con- 
tract, $25,000;  subscriptions  obtained,  $40,200,  of  which  $200 
represent  unearned  subscriptions ;  office  expenses,  $4,500 ;  office 
salaries,  $10,000.  The  office  equipment  is  valued  at  $5,000. 
There  are  unpaid  subscriptions  amounting  to  $17,000;  cash  on 
hand,  $10,000 ;  unpublished  manuscripts,  $4,500 ;  due  to  authors, 
$2,000 ;  accounts  payable,  $4,000.  The  company  has  capital  stock 
outstanding  $25,000  and  a  surplus  on  October  15,  1914,  of  $4,800. 

Prepare  a  profit  and  loss  statement  for  the  period  from  October 
15  to  December  31,  1914,  and  a  balance  sheet  as  of  December  31, 
1914. 


PRACTICAL   PROBLEMS,  GRADED,  SERIES  A 


Code:    Certify 

"A"  &  "B"  are  partners  owning  two  retail  stores,  one  in  Pater- 
son  and  the  other  in  Newark.  They  agree  to  dissolve  partnership 
as  of  July  1,  1912.  The  two  stores  are  valued  July  1,  1912,  as 
follows :  Paterson  $4,573.50,  Newark  $3,600.  On  this  basis,  "B" 
contemplates  purchasing  *'A's"  interest.  On  being  furnished  with 
the  following  data,  *'B"  requests  you  to  inform  him  if  the  inven- 
tory of  the  Paterson  store  January  1,  1912,  was  correct  as  "A" 
claims : 

Value   of  the   alleged   inventory  January   1,    1912,   in  the 

Paterson   store   - $  3,800.00 

Purchases  for  both  stores,  January  to  July,  paid  for 5,128.80 

Due  to  creditors  on  account  of  both  stores,  July  1 1,500.00 

Cash  sales,  Newark  store 1,875.00 

Cash  sales,  Paterson  store 3,105.00 

Purchases,  Paterson  store,  January  to  July 3,326.00 

Profits  50%  of  sales. 

Prepare  a  statement  proving  whether  or  not  the  inventory  of 
the  Paterson  store  January  1,  1912,  was  correct  as  stated. 


Code  :    Chalet 

On  April  1st,  1909,  a  Tobacco  Manufacturer  purchases  42,- 
600  pounds  of  leaf  (lying  in  bond)  at  121/2  cents  per  pound.  His 
trade  is  divided  into  two  departments,  No.  1  and  No.  2. 

During  the*  half  year  ended  September  30th,  1909,  he  takes 
out  of  bond  34,200  pounds,  paying  thereon  duty  at  75  cents  per 
pound,  and  sundry  expenses  one  cent  per  pound.  This  leaf  is 
used  in  the  manufacturing,  viz. :  21,500  pounds  for  No.  1,  and  12,- 
TOU  pounds  for  No.  2,  and  in  process  of  manufacture  the  weights 
increase  by  12  per  cent  and  15  per  cent,  respectively. 

Of  the  finished  article,  he  sells  19,240  pounds  of  No.  1  at 
$1.25  per  pound,  and  13,()()0  pounds  of  No.  2  at  $1  per  poimd, 
allowing  4  per  cent  discount  in  each  case. 

The  expenses  are:  wages,  $3,630;  packing,  $550;  freight, 
$315  ;  salesmen's  expenses,  980  ;  rent,  taxes,  etc.,  $715  ;  advertising, 
$435  ;  repairs,  $280  ;  simdries,  $165. 

He  values  his  stock  on  hand  at  September  30th,  1909,  as  fol- 
lows: leaf  in  bond  at  cost;  in  department  No.  1  at  $1.02  per 
pound ;  in  department  No.  2  at  91  cents  per  pound,  which  figures, 
however,  might  require  correction,  dividing  the  expenses  thus : 
two-thirds  to  department  No.  1,  and  one-third  to  department  No. 
2. 

Prepare  ledger  account  of  leaf  in  bond  and  Profit  and  Loss 
Accounts  for  tl;ie  half  year  for  departments  No.  1  and  No.  2, 
showing  details,  results,  and  stocks  (weight  and  cost  price)  on 
hand. 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  A 

Code:   Change 

"A"  and  "B"  on  winding  up  their  partnership  found  their 
assets  realized  as  follows: 

Factory  premises  standing  in  their  books  at  $10,000,  realized 
$4,000. 

Machinery  standing  in  their  books  at  $7,500  realized  $2,500. 

Merchandise  standing  in  their  books  at  $5,500  realized  $4,500. 

Accounts  receivable  standing  in  their  books  at  $9,500  realized 
$6,500. 

Their  unpaid  liabilities  were  $10,500.  "A's"  capital  stood  at 
$15,000,  and  "B's"  capital  at  $7,000.  In  respect  to  profits  and 
losses  they  were  equal  partners. 

Divide  the  proceeds  of  the  realization  between  them  after  pay- 
ing off  the  liabilities,  and  debit  them  as  having  been  paid  the  pro- 
portion to  which  each  was  entitled,  and  show  what  amount  would 
be  payable,  if  any,  by  either  partner  to  the  other  to  settle  the 
accounts. 


Code  :   Charge 

The  capital  of  an  irrigation  company  is  made  up  of  $1,000,- 
000  common  stock  and  $500,000  5  per  cent  cumulative  preferred 
stock.    The  profits  of  any  year  are  to  be  applied : 

1st.  To  paying  the  manager  5  per  cent  thereof  for  remun- 
eration. 

2nd.  To  paying  the  preferred  dividend  and  any  arrears 
thereof. 

3rd.    To  the  common  dividend  up  to  10  per  cent. 

Any  surplus  on  the  above  to  be  applied : 

1st.    10  per  cent  thereof  to  the  manager  as  bonus. 

2nd.  Two-thirds  of  the  remainder  as  further  dividend  on 
common  stock. 

3rd.    One-third  of  the  remainder  to  reserve. 

The  profits  of  the  year  1908  were  $175,000.  The  preference 
dividend  of  1907  was  2  per  cent  in  arrears. 

Distribute  the  profits  on  the  lines  stated,  using  a  ledger  form 
to  show  the  appropriations  you  make. 


PRACTICAL   PROBLEMS,  GRADED,  SERIES  A 


Code:   Chase 

"A,"  "B"  and  "C"  engage  in  business,  "A"  contributing  $10,- 
000  capital;  "B"  $5,000  and  "C"  undertakes  to  take  the  active 
management  at  a  salary  of  $3,000  a  year,  to  be  paid  to  him 
monthly.  After  providing  5  per  cent  interest  on  capital,  they  are 
to  divide  the  net  results  in  the  proportion  of  5,  3  and  3.  At  the 
end  of  18  months,  they  ascertain  the  position  to  be  unfavorable 
and  decide  to  wind  up.  The  assets  are  agreed  to  be  worth  $12,- 
500,  of  which  "A"  takes  $10,000  and  "B"  $2,500.  There  are  no 
liabilities  except  for  the  capital  and  simple  interest  thereon,  and 
one  month's  salary  due  "C."  State  the  position  of  the  three  part- 
ners to  each  other. 


Code  :   Cheer 

On  June  30,  1905,  the  following  balance  sheet  of  a  small 
merchant  is  furnished  by  him : 

Cash  at  bankers,  $575.  Cash  in  office,  $225.  Accounts  re- 
ceivable, $3,785.  Merchandise,  $1,000.  Store  fixtures,  $415.  Ac- 
counts payable  $3,500.  Bills  payable,  $2,000.  Balance  (Capital) 
$500. 

Upon  inquiry  it  is  disclosed  that  the  following  items  have 
been  omitted  from  the  balance  sheet,  and  have  not  been  entered 
on  the  books,  viz. : 

(a)  $1,000  borrowed  at  6  per  cent,  June  30,  1903,  upon  which 
nothing  has  been  paid  in  respect  of  either  principal  or  interest. 

(b)  $50  due  for  rent  of  store. 

The  cash  is  found  to  include  sundry  petty  expense  items 
amounting  to  $35  and  an  I.  O.  U.  of  a  former  employe  for  $50, 
which  is  worthless. 

$1,500  of  the  accounts  receivable  are  known  to  be  bad; 
$1,500  are  good,  and  the  balance  is  estimated  to  produce  $500. 
The  merchandise  can  be  sold  to  realize  $750.  The  fixtures  will 
realize  $150.    The  merchant  has  no  personal  assets. 

Prepare  a  statement  of  affairs  and  a  deficiency  account. 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  A 


Code:   Chew 

A  firm  of  three  partners  divided  their  profits  as  follows: 
"A,"  11-25 ;  "B,"  8-25 ;  "C,"  6-25.  By  the  partnership  agreement, 
it  was  provided  that  in  the  event  of  the  death  of  either,  the  sur- 
vivors should  take  the  deceased's  share  in  the  proportion  they 
already  shared  the  profits.  "A"  dies.  What  proportion  of  the 
profits  would  "B"  and  "C"  respectively  take  afterwards  ? 


PRACTICAL   PROBLEMS,  GRADED,  SERIES  A 


Code:    Chin 

Prepare  a  Trading  and  Profit  and  Loss  Account  from  the 
following  Trial  Balance  and  data  for  the  year  ending  December 
31st,  1909: 

The  stock  of  stores  and  materials  at  the  end  of  the  year, 
December  31st,  1909,  was  $8,500.  The  rent  at  the  rate  of  $2,500 
was  paid  up  to  the  30th  of  September.  Bad  debts  amounting  to 
$850.00  have  to  be  written  oflF.  A  provision  of  $1,250  had  to  be 
made  to  meet  possible  bad  debts.  Depreciation  at  the  rate  of  5 
per  cent  per  annum  on  the  plant  at  January  1st,  1909,  has  to  be 
written  off.  The  wages  are  paid  up  to  the  27th  of  December; 
the  wages  from  that  date  to  the  31st  of  December  amount  to  $175. 
Interest  at  5  per  cent  per  annum  has  to  be  passed  on  the  amount 
of  the  Partners'  Capital  Accounts  at  January  1st,  1909.  (No  in- 
terest on  Partners'  Current  Accounts.)  Profits  to  be  divided 
equally  between  the  partners.  The  necessary  entries  for  division 
of  profits  and  interest,  etc.,  to  be  passed  through  the  Partners' 
Current  Accounts.  It  is  assumed  that  no  further  entries  are  re- 
quired to  be  made  to  complete  the  accounts. 

JOHNSON  AND  WHITE 
Trial  Balance,  December  31st,  1909 

Investments    $    2,410.00    $ 

Accounts  Payable  19,125.00 

Stores  and  Materials,  January  1st,  1909 2,120.00 

Johnson's  Capital  29,600.00 

White's  Capital  15,300.00 

Purchases   24,225.00 

Johnson's  Current  Account  2,310.00 

White's  Current  Account 3^910.00 

Accounts  Receivable  13^265.00 

Wages    27i825'00 

Rf"^    "V " ~ 1,875.00 

Uividends  on  Investments  115  00 

Plant,  January  1st,  1909 44,100.00 

Bills  Payable  4,975.00 

Bank  975.00 

Office  Expenses  and  Salaries  2,100.00 

Installments  received  on  account  of  work  in  pro- 

^S^^^s  14,355.00 

Taxes _ 40.OO 

Bills  Receivable 3,670.00 

Cash  in  Office  '  50.00 

Law  and  Accountancy  Charges  255  00 

Repairs.. .'  330.00 

Work  in  Progress,  December  31,  1909 25,905.00 

Bank  Charges '  900O 

Sales Z  ■           70,035.00 

'  $154,480.00    $154,480.00 

Also  prepare  a  Balance  Sheet  and  Partners'  Current  and 
Capital  Accounts  from  the  above  trial  balance. 


PRACTICAL   PROBLEMS,  GRADED,  SERIES  A 


Code  :    Dash 

Before  making  the  charges  referred  to  below,  the  profit  and 
loss  account  of  a  corporation  for  the  year  shows  a  credit  balance 
of  $60,000.  The  accounts  receivable  are  $40,700,  and  the  plant 
and  machinery  account  is  $55,000.  The  6%  preferred  stock  is 
$50,000  and  the  common  stock  $150,000.  It  is  decided  (a)  to 
provide,  out  of  the  above  named  profit  and  loss  balance,  7%% 
depreciation  on  plant  and  machinery ;  (b)  to  write  off  as  uncollect- 
able  $1,500  of  the  accounts  receivable  and  to  make  a  reserve  of 
8%  on  the  remainder  of  the  accounts  receivable  to  provide  for 
possible  losses  thereon;  (c)  to  provide  for  the  preferred  stock 
dividend  for  the  year;  (d)  to  provide  for  a  bonus  of  $7,500  to 
the  employes ;  (>)  to  provide  for  a  dividend  on  the  common  stock 
of  15%  for  the  year;  and  (/)  to  carry  the  balance  then  remaining 
on  profit  and  loss  account  to  undivided  profits  account. 

Draft  entries  to  comply  with  the  above  provisions. 


Code  :    Deform 

The  following  balance  sheet  is  submitted  to  you  by  a  client 
for  inspection  and  criticism.  Prepare  a  report  to  your  client, 
criticising  such  items  as  you  consider  abnormal: 

ASSETS: 

Buildings  $  87,50) 

Machinery 12,500 

Stock   (inventory)  90,000 

Cash    _ 3  200 

Bills  Receivable  _ 6800 

Accounts  Receivable  20000 

Goodwill  and  Patents  30000 

'■ —       $250,000 

LIABILITIES :  === 

Capital  and  Surplus  $155,000 

Accounts  Payable  70,000 

Bills  Payable  17500 

Suspense  Account  7^500 

'- —       $250,000 


«' 


PRACTICAL   PROBLEMS,  GRADED,  SERIES  A 


Code  :    Degree 

Criticize  the  following  balance  sheet: 

ASSETS  ■ 

Machinery,  at  cost $70,000.00 

Buildings,  at  cost  20,000.00 

Goodwill  25,000.00 

Formation  Expenses , 3,000.00 

Inventory — 

Raw  Material,  at  cost $10,000.00 

Merchandise  in  process  of  manufacture,  at  cost...  10,000.00 

Merchandise,  finished,  at  selling  price 23,000.00      43,000.00 

Bills  Receivable,  face  value 3,500.00 

Accounts  Receivable,  face  value  22,000.00 

Cash  2,500.0P 

$189,000.00 

LIABILITIES : 

Capital  Stock  $100,000.00 

Bills  Payable  50,000.00 

Accounts  Payable  30,000.00 

Undivided  Profits  9,000.00  $189,000.00 


PRACTICAL   PROBLEMS,  GRADED,  SERIES  A 


Code  :    Deify 

You  are  retained  by  the  Atwood  Manufacturing  Company  to 
prepare  closing  entries  and  balance  sheet  as  of  Dec.  31,  1915. 
Trial  Balance  of  Dec.  31,  1915,  was  as  follows : 

Cash  _ $    5,259.80    $ 

Sales  : „ „ 241,721.76 

Notes  payable 16,922.81 

Materials  and  supplies  52,088.94 

Notes  receivable  5,048.75 

Merchandise  purchases  4,730.09 

Selling  wages 22,400.04 

Manufacturing  wages  88,317.70 

Office  salaries  5,802.50 

Manufacturing  expenses  15,353.16 

Office  expenses  2,496.14 

General  selling  expenses  3,491.50 

Advertising  2,064.33 

Light,  heat  and  power  3,121.97 

Rent  of  factory  4,000.00 

Repairs  to  machinery  and  tools  845.78 

Delivery  expenses  ^ 2,201.01 

Interest  and  discount 738.40 

Commissions  5,089.30 

Machinery  and  tools  133,817.24 

Dividend  (paid  Dec.  15,  1915)  6,000.00 

Furniture,  office  12.516.45 

Accounts  receivable  58,935.20 

Accounts  payable  17,990.57 

Reserve  for  suspended  accounts 320  59 

Goodwill 40,000.00 

Capital  stock „...  200,000.00 

Accounts  rec.  in  suspense  2,637.43 

$476,955.73  $476,955.73 


The  Inventory  of  merchandise,  and  materials  and  supplies, 
amounts  to  $6,053.90  and  $6,400.00  respectively. 

You  discover  the  following  facts  not  disclosed  by  the  books: 

Invoices  not  entered — 

Buffalo  SteelCo.,  for  steel $165.00 

Smith  Safe  &  Lock  Co.,  for  office  safe 110.00 

Yates  Coal  Co.,  for  coal 42.50 

Provide  the  following  reserves  for  depreciation: 

On  machinery  and  tools _ 10% 

On  furniture  25% 


PRACTICAL   PROBLEMS,  GRADED,  SERIES  A 


Code  :    Deitv 

From  the  following  figures  of  net  sales,  costs  and  expenses 
prepare  a  statement,  accounting  for  the  shrinkage  in  profits  in 
1910,  showing  in  dollars  and  cents  what  portion  of  such  shrinkage 
is  due  to  decreased  sales  and  what  portion  is  occasioned  by  the 
several  variations  in  cost  and  expense  items : 

1910  1909 

Materials  $  230,500     $  265,335 

Direct  labor 78,500  108,22875 

Indirect  labor  6,725  8,379 

Factory  expenses  27,500  26,999 

Trading  expenses  23,500  20,947.50 

Office  expenses  10,500  11,637.50 

Net  sales 390,750  465,500 


Code  ;   Dey 

From  the  under-noted  particulars  prepare  the  Profit  and 
Loss  Account  and  Balance  Sheet  of  the  Washington  Trading 
Company  as  at  June  30,  1914: 

BUls   Receivable    |  2,550.00 

Bills  Payable    2,300.00 

Depreciation   Reserve    (Property) 5,000.00 

Rainier  National  Bank 11,650.00 

Cash     650.00 

Office  Furniture 2,400.00 

Interest   Received    50.00 

Reserve  for  Bad  Debts 6,350.00 

Directors'    Fees    2.750.00 

Inventory,   June   30,   1914 21,300.00 

Legal   Expenses 130.00 

Office   Expenses    8,335.00 

Rent     1,500.00 

Income  Tax   Paid 150.00 

Salaries     3,800.00 

Rent  and  Taxes  paid  in  Advance 165.00 

Property  (Real  Estate  and  Buildings) 20,000.00   . 

Accounts   Receivable    39,285.00 

Accounts  Payable 23,590.00 

Trading  Account  (Profit) 27,375.00 

Capital  Stock,  Preferred 25.000.00 

Capital  Stock,  Common 25,000.00 

Provide  5%  depreciation  on  the  Office  Furniture  and  Fix- 
tures and  reserve  a  further  10%  for  Bad  and  Doubtful  Ac- 
counts. 


PRACTICAL   PROBLEMS,  GRADED,  SERIES  A 


Code  :    Diadem 

The  undermentioned  errors  were  discovered  in  the  books 
of  S.  Johnson  &  Company  of  New  York  City  affecting  the  year 
ending  June  30.  1910: 

(1)  April  20— A  check  received  from  W.  Brown  for  $11.00 

was  posted  to  his  credit  as  lie. 

(2)  May  31— A  sale  of  $56.25  was  credited  correctly,  but 

debited  to  the  customer's  account  as 
$52.65. 

(3)  June  29 — Goods  were  returned  by  H.  Jones  &  Com- 

pany of  the  invoice  value  of  $27.10  and 
were  taken  into  stock  at  $22.00,  but  the 
returns  were  not  entered  in  the  books 
until  the  following  month. 

(4)  June  29 — The  acceptance  of  Pomard  Freres  to  John- 

son &  Company's  draft  for  1,325  francs, 
payable  in  Paris,  and  which  had  been 
discounted,  was  dishonored.  The  ac- 
ceptance was  worthless  and  the  bank- 
ers debited  Johnson  &  Company's  ac- 
count on  July  1,  1910. 

Show  how  the  adjusting  entries  should  be  made  in  the 
books  of  S.  Johnson  &  Company  on  June  30,  1910. 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  A 


Code  :    Dial 

"A,"  "B"  and  *'C"  are  equal  partners.  The  partnership 
property  is  worth  $10,000.  "A"  has  $5,000  individually,  "B," 
$4,000,  and  "C"  no  assets.  The  partnership  debts  amount  to 
$12,000.  "A's"  debts  amount  to  $3,000,  "B's"  to  $6,000  and 
"C's"  to  $2,000.  Adjust  these  sums  among  the  firm  and  indi- 
vidual  creditors. 


Code  :    Dialogue 

"A"  offers  to  take  "B"  into  partnership  on  equal  terms, 
upon  payment  by  "B"  of  a  premium  of  $12,500.00.  But,  as  "B* 
is  unable  to  pay  the  money  for  three  years,  the  following  arrange- 
ment is  agreed  upon.  The  profits  are  to  be  divided  in  the  pro- 
portions of  two  thirds  to  "A"  and  one  third  to  "B."  "B"  will 
draw  one  third  of  his  share  of  the  profits,  leave  one  third  in  the 
business,  and  hand  over  the  remainder  to  "A"  in  part  payment 
of  the  premium  as  above.  The  profits  for  the  first  three  years 
are  as  follows: 

1st  year  $  8,000.00 

2nd  year  10,000.00 

3rd  year 11,000.00 

Draw  up  the  partnership  accounts  for  these  three  years,  and 
show  the  amount  due  from  "B"  to  "A"  at  the  end  of  the  period. 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  A 


Code  :    Diamond 

The  Ajax  Manufacturing  Co.,  Trial  Balance,  Dec.  31.  1908 : 

Inventory,  Jan.  1st,  '08 $  4,330.00      $ 

Purchases  25,000.00 

^^ges  .    9,400.00 

factory  Expense  240.00 

Sales  _ _ _ 20  810  80 

Cash  Discount  received  on  Purchases 52700 

Allowances  19500 

^^"t    -:--- 600.00 

ueneral  Expense  612  60 

Insurance  to  Sept.  1st,  '09 H^l"".** 36000 

Salaries,  Salesmen  ;....;;';  850"00 

Commisson    45  qq 

Traveling  Expense  150^00 

Cartage  on  Deliveries  ; "  '  180.20 

Salaries,  Office  and  Management 3  34000 

^^^^  '  56^00 

tJank 4  001.00 

Interest  on  Notes  Payable ......"         400.00 

Accounts  Receivable 17013  00 

Deposits  on  Contracts 500.00 

Loans  4  234  00 

Plant  and  Machinery  ■';■    lO^OOO.OO 

Accounts  Payable 7  583  qq 

Notes  Payable  7  00000 

Profit  from  the  Sale  of  Land ""."..'."1..."..  500000 

Capital  Stock  ic'rifin'nn 

s-pi- ::::=:::=^^^^^^ IS 

$81,506.80     $81,506.80 

The  stock  on  hand  on  Dec.  31,  1908,  is  valued  at  $11,630.21. 

Draw  up  a  Profit  and  Loss  Account  and  Balance  Sheet  pro- 
viding for  depreciation  at  the  rate  of  10%  per  annum  on  plant 
and  machinery;  make  a  reserve  of  2%  of  book  debts  to  cover 
bad  and  doubtful  accounts;  also  provide  a  special  reserve  as  an 
additional  compensation  for  the  management  of  2%  of  the  net 
profits. 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  A 

Code  :     Diary 

From  the  following  trial  balance,  preparing  a  Trading  Ac- 
count, Profit  and  Loss  Account  and  Balance  Sheet  as  of  Dec.  31, 
191L 

Buildings  $  24,000.00    $ 

Plant  and  Machinery  6,000.00 

g^*^^.^^"  "--"-: 12,900.00 

rurniture  and  Fixtures 180000 

Investments  870000 

Partners'  Capital,  Jan.  ist,"'ii;;i;;;:;;:;;::;;;;;:;:::i::i;::;:    '  '     112,500.00 

Drawing  Account  2  775  00 

Cash  in  Bank ZZZIZ".  mlsOO'.OO 

Lash  in  Safe  375  00 

Bills  Receivable  5  25000 

Bills  Payable  '      "             4  575  00 

Sundry  Debtors  '.IZIIIZ  11,700.00           '      " 

sundry  Creditors 579Q00 

^Y^hases  51,000.00 

T^:s:etr:=^^^^^^^  ,055.00       ^^^^"^ 

Salaries  7i9i;nn 

I  raveling  Expenses j  275  00 

Light,   Heat  and  Power 51000 

Freight,  Outward IZZIZ      1,365:00 

Wages  j9  755  qq 

Discounts  and  Allowances 405  00 

Sundry  Selling  Expenses  ^Z."™......  1  11000 

Insurance   "" 345  00 

Bad  Debts j  170  00 

Inventory.  Jan.  1st.  1911 "ZZIZZIZZ  33,000.00 

$203,115.00    $203,115.00 
Write  oflf  2%  on  buildings,  71/2%  on  plant  and  machinery, 
and  10%  on  furniture  and  fixtures  as  depreciation,  also  credit 
5%  interest  on  partners'  capital  from  Jan.  1,  1911.    • 

The  inventory  value  of  the  goods  on  hand  Dec    31    1911 
is   $46,080.00. 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  A 


Code  :    Diasto 

The  following  trial  balance  of  the  Century  Manufacturing 
Company  has  been  prepared  for  audit  at  March  31,  1910,  by  an 
inexperienced  bookkeeper,  who  explains  that  he  has  not  in- 
cluded the  capital  items  consisting  of  10,000  $10.00  6%  Prefer- 
ence Shares  fully  paid  and  20.000  $10.00  Common  Shares,  upon 
which  only  75%  of  the  par  value  has  been  paid.  After  ad- 
justing this  and  other  obvious  blunders  there  is  still  an  error 
m  the  trial  balance  which  you  discover  is  in  the  Sales  Journal 
additions,  whilst  you  also  find  that  the  stock  at  March  31. 
iy09,  which  was  $120,000.00,  is  omitted  as  a  balance. 

After  making  the  following  provisions: 

(1)  Reserving  2%  of  the  Accounts  Receivable  for   bad 

accounts. 

(2)  Reserving  5%   for   Depreciation   on   Machinery  and 

Plrnt. 
(; )     Writing  back  to  Reserve  the  bad  debts  incurred  dur- 
ing the  year. 

(4)  Provision  for  the  payment  of  a  year's  dividend  on 

the  Preference  Shares  and  a  dividend  of  5%  on 
the  Coirmon  Shares. 

(5)  Reserving  6%  for  lease  expiration, 
y^u  Ere  required  to  prepare — 

(1)  A  correct  trial  balance  (the  accounts  to  be  arranged 

in  systematic  order) 

(2)  A  Balance  Sheet,  Surplus  and  Profit  and  Loss  Ac- 

count. 

(3)  Closing  Journal  Entries. 

(4)  List  of  ledger  balances  (after  closing). 

lalts''"'''  ''"""'^" ""'■  »  n%0.00 

Qndrvided   ProAis  ' ! ! :  [  l !  i  i ! .' : ! ! ! ' ' ! ! ''li^Va 

Wages  •  9Q  AA  0,500.00 

Accounts  Paykbie  '.■.:.■:::::::;:::: '  23,000.00 

Bad  Debts    5  700  00          ^2,500.00 

Repairs     ! .  . ! ! ! ! ! ! 184000 

Value  of  Lease. 20,'000.00 

Depreciation  of  Lease  Reserve i  9nn  nn 

Machinery  and  Plant 52  000  00            ^•^""•"" 

Stock  March   31,   1910 .,  lUOOOOO 

Discounts  on  Purchases 2200  00 

Rents  $5,000.  and  Taxes  $1,150 .' .' .*  6'l5000 

Rent  from  Sub-Tenants s'eOO  00 

Traveling  Expenses 2900  00 

Accounts   Receivable    .*  135!000]00 

(.ash    in    Hand 690.00 

Purchases    196.000.00 

Goodwill      „p.  rtnn  nn 

Bills    Receivable    .' .* ." .'  6.400  00          -^^'^OO.OO 

General  Office  Expenses 10000  00 

Stationery  and  Printing 1120  00 

Discount    on    Sales '                       q  onn  nn 

Cash   on   Hand   at   Bank .'  llioOOOO 

$581,600.00      $429,000.00 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  A 


Code  :    Diatom 

The  following  is  a  trial  balance  of  the  Coal  Mining  and 
Development  Company  as  of  December  31,  1908  : 

TRIAL   BALANCE 

Dec.  31,  1908 

Cash  $  5,674.50    $ 

Breaker  and  machinery  145,000 

Office  building  : 5,000 

Blacksmith    shop   4,000 

Inside  construction  15,675 

Car  and  mine  rail  account 7,534.50 

Horses  and  mules : 5,600 

Accounts  receivable 35,112.25 

Bills  receivable  10,000 

Capital  stock— common  .: 50,000 

Capital  stock— preferred  100,000 

Coal  sales  257,890 

Accounts  payable  —„ 12,500 

Surplus  17,709.35 

Dep.  on  buildings  and  machinery  12,000 

Supplies   „... 8,240 

Pay  roll— outside  24,701.50 

Pay  roll— inside  110,434.25 

Salaries — supt.,  etc 6,000 

Salaries — office  clerks  4,500 

Office  expense  : 1,147.35 

General  expense  750 

Claims  for  injuries  4,000 

Insurance  (expires  July  1,  1909)  ^ 5,500 

Repairs  to  buildings  4,075 

Repairs  to  construction  3,445 

Barn  expense 1,500 

Selling  expense  '. 4,500 

Royalty  account  30,500 

Water   800 

Fuel 935 

Timber  and  props  5,475 

$  450.099.35    $  450.099.35 

.  The  total  output  for  the  year  was  132,300  tons. 

An  examination  of  the  books  and  records  shows  that  the 
following  charges  had  not  been  entered :  horses  and  mules  $2,200, 
car  and  mine  rail  account  $1,450,  claims  for  injuries  $1,000. 
During  the  year  the  bookkeeper  through  error  charged  $3,415 
to  inside  construction  in. stead  of  to  pay  roll  inside. 

Required  Profit  and  Loss  Account  and  Balance  Sheet.  The 
Profit  and  Loss  Account  to  show  percentages  covering  the  various 
elements  of  cost,  etc. 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  A 


Code  :     Dice 

The  balance  sheet  of  E.  F.  Co.  on  Dec.  31,  1908,  was  as 

follows : 

ASSETS. 

Cash  in  Bank  and  on  hand $  7,500.00 

Bills  Receivable  , 5,000.00 

Accounts  Receivable  25,000.00 

Mdse.  Inventory  at  Cost 30,000.00 

Furniture  and  Fixtures 3,000.00 

$70,500.00 

LIABILITIES. 

Accounts  Payable $32,500.00 

Bills  Payable 6,000.00 

Capital  Stock 25,000.00 

Undivided  Profits _ 7,000.00 

$70,500.00 

The  transactions  of  the  company  for  the  year  ending  Dec.  31, 
1909,  were  as  follows: 

Net  purchases,  $80,000.00. 
Net  sales,  $94,000.00. 
Cost  Qf  goods  sold,  $75,000.00. 

Total  selling  expenses,  including  interest,  $12,000.00,  of  which  $11,000.00 
nad  been  paid  in  cash  up  to  Dec.  31,  1909. 
Discounts  earned,  $2,000.00. 
Discounts  allowed,  $1,200.00. 
Cash  dividend  of  10%  paid  on  Capital  Stock. 
Bills  receivable  accepted  from  debtors,  $15,000.00. 
Bills  receivable  collected  in  cash,  $16,000.00. 
Cash  collections  on  accounts  receivable,  net,  $82,000.00. 
Bills  payable  paid  in  cash,  $18,000.00. 
Bills  payable  issued  to  trade  creditors,  $20,000.00. 
Accounts  payable  paid  in  cash,  gross,  $6i8,000.00. 

Before  closing  the  books  for  the  year  it  was  decided  (a)  to 
set  aside  as  a  reserve  for  bad  debts  V/2%  of  the  net  sales  for 
the  year;  (b)  to  write  off  against  the  reserve  $750.00  for  ascer- 
tained bad  accounts :  (c)  to  provide  a  depreciation  reserve  of  10% 
of  the  book  value  of  furniture  and  fixtures,  and  (d)  to  write  off 
$750.00  from  the  closing  inventory  on  account  of  obsolescence  of 
merchandise. 

You  are  required  to  prepare  the  balance  sheet  of  the  com- 
pany as  at  Dec.  31,  1909. 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  A 


Code  :    Dictate 

Following  is  a  condensed  Trial  Balance  of  the  Blank 
Manufacturing  Company  on  Dec.  31,  1908,  before  closing  the 
books  for  the  year: 

Inventories,   raw   materials  and   work   in   progress 

Jan.  1,  1908 $  31,500.00    $ 

Purchases  of  raw  materials  and  freight  thereon....  253,500.00 

Productive  labor  56,500.00 

Factory  expense  other  than  labor  and  materials 11,500.00 

Inventories  of  manufactured  goods,  Jan.  1,  1908 4,100.00 

Administration  and  general  expenses 23,700.00 

Sales,  gross  .; 408,700.00 

Freight,  outwards 25,800.00 

Discounts  allowed  1,600.00 

Bad  accounts  written  off 600.00 

Interest   3,500.00 

Discounts  received  2,300.00 

Cash,  and  accounts  and  bills  receivable  : 172,700.00 

Accounts  and  bills  payable 95,000.00 

Real  estate  and  buildings : 20,000.00 

Machinery  and  tools 67,000.00 

Furniture    1,300.00 

Capital  stock  100,000.00 

Undivided  profits 63,300.00 

Profit  from  sale  of  real  estate,  1908 _...  4,000.00 

$673,300.00    $673,300.00 

The  inventories  of  Dec.  31,  1908,  are:  Raw  material  and 
work  in   progress,  $05,648.00;   manufactured  goods,  $1,991.00. 

A  reserve  of  $7,000.00  is  to  set  up  for  depreciation  on  ma- 
chinery and  tools,  and  another  reserve  of  $3,000.00  is  to  be  pro- 
vided for  doubtful  accounts. 

A  commission  of  5%  on  the  net  profits  for  the  year  is  to  be 
credited  to  the  manager. 

After  taking  the  foregoing  items  into  account,  prepare  the 
following : 

List  of  ledger  balances  after  closing  books. 

Manufacturing  account. 

Trading  account. 

Profit  and  loss  account. 

Balance  sheet. 

Note:  For  the  purpose  of  class  uniformity,  allow  commission  on 
Profit  on  Sale  of  Real  Estate.  The  commission  is  to  be  treated  as  an 
administration  expense. 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  A 


Code  :    Differ 

The  directors  of  a  Manufacturing  Company,  before  closing 
the  books  for  the  half  year  ending  June  30,  1905,  declare  a  divi- 
dent  for  the  half  year  of  3%  on  the  preferred  stock  and  2%  on 
the  common  stock.  There  was  brought  forward  from  last  year 
an  undivided  profit  balance  of  $15,000.  Trial  balance  June  30, 
1905,  is  as  follows:    " 

Debit  Balances — 

Real  estate  and  buildings,  $65,000;  discount  and  interest, 
$1,500;  book  debts,  $84,000;  salaries  (general),  $22,000; 
trade  discounts  and  allowances,  $12,500;  stock  on  hand  De- 
cember 31,  1904,  $58,000;  plant  and  machinery,  $80,000; 
management  salaries,  $10,000;  preferred  stock  in  treasury, 
$10,000;  labor,  $176,000;  patents  and  goodwill,  $160,000; 
investments,  $31,000 ;  general  expenses,  $8,600 ;  cash  in  bank, 
$16,000 ;  freight,  $3,000 ;  repairs,  $2,000 ;  insurance,  $1,750 ; 
fuel,  $12,000;  purchases,  $165,000. 

Credit  Balances — 

Bills  payable,  $52,000 ;  profit  and  loss  account,  $8,000 ;  com- 
mon stock,  $200,000;  sales,  $438,350;  accounts  payable, 
$20,000;  preferred  stock,  $200,000. 

The  stock  on  hand  June  30,  1905,  is  $55,000.  Compile  profit 
and  lo^s  account  and  balance  sheet  as  at  June  30,  1905,  providing 
for  depreciation  at  7^/2%  per  annum  on  plant  and  machinery,  and 
a  reserve  of  5%  on  book  debts  to  provide  for  bad  and  doubtful 
accounts :  also  create  a  liability  for  the  dividend  as  stated  above. 


PRACTICAL   PROBLEMS,  GRADED,  SERIES  A 


Code  :    Dilate 

The  Trial  Balance  given  below  was  taken  from  the  books  of  a  firm 
of  Merchants  as  at  December  31,  1912.  You  are  required  to  prepare 
TrPding  and  Profit  and  Loss  Accounts  for  the  year  ending  that  date. 

When  preparing  the  accounts  it  is  necessary  to  take  the  following 
n^atters  into  consideration; 

(a)  Profits  and  Losses  are  shared  by  the  partners  in  the  follow 
ing  proportions,  A.  R.  Brown  2/3  and  H.  D.  Jones  1/3. 

(b)  Interest  at  5%  per  annum  is  to  be  computed  on  capital,  but 
not  on  drawings. 

(c)  10%  Depreciation  is  to  be  written  off  Leasehold  Premises. 

(d)  5%  Depreciation  is  to  be  written  off  Furniture  and  Fixtures. 

(e)  A  Reserve  for  Bad  Debts  is  to  be  created,  amounting  to  5%  o, 
the  total  amount  of  the  Accounts  Receivable. 

it)  The  Merchandise  on  hand  at  December  31,  1912,  was  valuea 
at  $4,590.00. 

TBZAI^  BAXiANCE. 

A.  R.  Brown,  Capital  Account   (including  $10,000.00 

paid  in  on  July  1.  1912)     

H.  D.  Jones,  Capital  Account   

Purchases    $147,005.00 

Keturns  and  Allowance  on  Purchases 

Taxes    2,100.00 

Salaries    16,065.00 

Light,  Heat  and  Telephones   390.00 

Insurance     245.00 

Advertising     1,865.00 

Sales     

Keturns  and  Allowances  on  Sales 5,600.00 

Bad  Debts  Written  Off 440.00 

Discounts  on  Sales 115.00 

Miscellaneous  Expenses   3,130.00 

furniture  and  Fixtures    2,050.00 

Leasehold  Premises   42,632.50 

Merchandise  Inventory,  January  1,  1912 6,510.00 

A.  R.  Brown,  Drawing  Account 12,000.00 

H,  D.  Jones,  Drawing  Account   4,000.00 

Cash  in  Bank 6,090.00 

Cash  on  Hand    87.50 

Accounts  Receivable   31,850.00 

Accounts  Payable 


$39,000.00 
11,500.00 

4,465.00 


205,510.00 


21,700.00 


$282.175.00      $282,175.00 

Prepare  the  necessary  Adjusting  Journal  Entries  and  the  State- 
ments previously  referred  to. 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  A 


Code:    Dilemma 

The  ledger  of  the  firm  of  Cutter  &  Fitler,  retail  dealers  in 
men's  clothing  and  furnishings,  showed  the  following  balances  on 
December  31,  1912: 

Dr.  Cr. 

Cash    $  2,896.14    $ 

Accounts   receivable 28,226.06 

Bills  receivable  1,650.00 

Furniture  and  fixtures 6,344.92 

Accounts  payable 12,518.30 

Bills  payable  5,598.66 

Inventory,  Jan.  1,  1912: 

Clothing  department  12,689.54 

Shoe  department  5,219.78 

Haberdashery    department    4,711.44 

Purchases : 

Clothing  department  36,148.83 

Shoe  department 15,291.34 

Haberdashery  department  „ 12,680.27 

Sales : 

Clothing  department  54,723.57 

Shoe  department 23,107.82 

Haberdashery  department  ..• 18,560.26 

Wages : 

Clothing  department  2,867.50 

Shoe  department  1,324.80 

Haberdashery  department  987.65 

General  expenses  1,834.19 

Office  salaries  1,450.00 

Rent   3,000.00 

Taxes  782.96 

Insurance  387.39 

Bad  debts  463.28 

Amos  Cutler,  capital  account  20,000.00 

Hiram  Fitler,              "             10,000.00 

Amos  Cutler,  withdrawal  account 3,701.68 

Hiram  Fitler,          "                 "       1,850.84 

$144,508.61   $144,508.61 

Inventories  on  December  31,  1912,  are  as  follows: 

Clothing  department  $  14,466.23 

Shoe  department  4,913.62 

Haberdashery  department  5,028.96 

Prepayments  on  that  date  are : 

Taxes  _ 168.22 

Insurance  57.30 

There  are  no  accrued  liabilities. 

Depreciation  of  10%  is  to  be  written  off  from  furniture  and 
fixtures. 

Each  partner  is  to  be  credited  with  6%  interest  on  his  capital. 
No  interest  is  to  be  charged  on  partners*  withdrawals. 
Net  profit  or  loss  to  be  divided :    Cutter  %,  Fitler  %. 
Prepare  the  following : 

1 — Trading  account  for  each  department. 

3 — Profit  and  loss  account. 

3 — Capital  account  of  each  partner. 

4 — Balance  sheet. 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  A 


Code  :     Diligence 

"A"  and  "B"  are  engaged  in  business  as  traders.  '*A"  offers 
to  purchase  ''B's"  interest.  It  is  inexpedient  to  take  an  inventory 
or  to  examine  the  books.  The  following  facts  have  been  com- 
piled by  the  bookkeeper  and  are  to  be  given  full  credence.  The 
following  data  is  submitted  to  an  accountant  from  which  he  is 
requested  to  prepare  and  to  furnish  a  Profit  and  Loss  Account 
and  a  financial  statement  showing  partnership  interests.  Prepare 
the  statements. 

CASH  TRANSACTIONS 


"As"  Investment $  5,000 

"B's"  Investment  2,500 

Cash  Received  from  Charge 

Sales  98,000 

Cash  Sales  9,200 


Cash  Payment  for  Mdse $98,400 

Expenses  800 

"A's"  Drawings  14,000 

"B's"  Drawings  1,500 

Accounts  Payable $  9,000 


OTHER  DATA 
Accounts  Receivable $10,000 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  A 


Code  :     Dilute 

Define  the  following: 

1.  Voucher  Record  Book; 

2.  Fixed  Charges; 

3.  Sinking  Fund  Investment  Account; 

4.  Current  Account; 

5.  Current  Asset; 

6.  Pay  Roll  Bank  Account; 

7.  Reserve  for  Bad  and  Doubtful  Accounts ; 

8.  Selling  Expenses; 

9.  Reserve  for  Expiration  of  Patent  Rights; 

10.  Reserve  for  Amortization  of  Improvements  on  Leasehold  Property ; 

11.  Royalty; 

12.  Partner's  Capital  Account; 

13.  Deferred  Charges  to  Operations; 

14.  Preferred  Stock; 

15.  Perpetual  Inventory; 

16.  Journal  Voucher; 

17.  Finished  Product; 

18.  Second  Mortgage  6%  Serial  Gold  Bonds ; 

19.  Discount ; 

20.  Re-insurance  Return  Premium  Recoveries. 


PRACTICAL  PROBLEMS,  GRADED^  SERIES  A 

Code :    Dim 

You  are  called  in  as  a  public  accountant  to  assist  a  firm  in 
the  preparation  of  a  balance  sheet  as  at  December  31,  1915,  and 
in  the  balancing  of  the  books.  After  examination,  you  find  the 
following  facts : 

1.  On  January  3  three  items,  amounting  to  $50,000.00  in  the  aggregate. 

were  received  in  cash,  but  were  entered  as  at  December  31.  1915. 
No  cash  account  is  kept  in  the  general  ledger. 

2.  An  item  was  posted  to  the  credit  of  an  account  in  the  sales  ledger  from 

the  cash  book  as  $5,050.00  instead  of  $50.50.  A  sales  ledger  control 
account  is  kept  in  the  general  ledger. 

3.  The  Petty  Cash  fund  is  kept  on  the  imprest  system.    On  December  31, 

1915,  a  voucher  covering  expenditures  to  date  was  passed  and  entered 
in  the  voucher  register.  The  check  in  payment  thereof  was  not  en- 
tered in  the  cash  book  until  January  3,  1916. 

4.  A  building  had  been  destroyed  by  fire,  and  the  insurance  recovered  had 

been  credited  to  the  asset  account  and  the  cost  of  replacement  had 
been  debited  thereto. 

5.  An  item  was  posted  to  the  debit  of  the  interest  account  in  the  general 

ledger  from  the  journal  as  $3.03.    It  should  have  been  $303.00. 

6.  Sales  aggregating  $25,000.00  were  entered  on  the  books  as  at  December 

31,  1915,  but  the  goods  were  not  all  delivered  until  January  25,  1916. 

Indicate  what  adjustments  you  would  make  of  the  books  or 
of  the  accounts  for  the  purpose  of  the  balance  sheet.  Give  jour- 
nal entries. 


Code:    Dime 

An  electric  light  company  finds  that  its  feed  wires  to  a  cer- 
tain district  are  not  adequate  to  carry  the  load  and  installs  a  new 
wire  on  the  same  poles.  The  cost  of  the  new  line  was  $15,000.00 
for  material  and  $7,000.00  for  the  expense  of  installation. 

The  cost  of  that  part  of  the  old  line  which  was  removed  was 
$6,000.00  for  material  and  $3,000.00  for  installation.  The  salvage 
value  of  the  old  material  was  $5,000.00.  The  cost  of  that  part  of 
the  old  line  which  was  not  removed  was  $4,000.00  for  material 
and  $3,000.00  for  installation. 

The  line  had  been  in  service  for  8  years,  and  depreciation 
had  been  regularly  provided  at  3%  of  the  cost  value  of  the  trans- 
mission system. 

Draft  the  journal  entries  necessary  to  record  properly  the 
facts. 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  A 


Code:    Diminish 

John  Adams  lost  his  stock  of  merchandise  May  1,  1914,  through 
a  flood  in  the  Mississippi  river. 

Adams  applied  to  the  local  Mutual  Flood  Insurance  Society 
for  reimbursements,  claiming  a  loss  of  $5,886.35  on  merchandise 
stock.  P>om  the  following  data  ascertain  his  merchandise  inven- 
tory: 

Net  profits  May  1,  1914,  $4,452.91;  drawings,  $1,598;  legal 
expenses,  $17.50;  interest  debit,  $313;  advertising,  $14;  commis- 
sions debit,  $961.01;  insurance,  $196.23;  sales,  $81,688.04;  inven- 
tory December,  1911,  $1,568.62;  purchases,  $55,415.82;  labor  pro- 
ductive, $19,499.58 ;  telephone,  $416.06 ;  sundry  factory  expenses, 
$3,201.92;  repairs,  $16;  surplus  May  1,  1914,  $2,854.91. 


Code  :    Dimple 

The  "A"  corporation,  to  prevent  injurious  competition,  pur- 
chases from  the  "B"  corporation,  a  competing  firm,  the  whole  of 
its  business  as  a  going  concern  on  January  1,  1905,  for  $500,- 
000.00,  subject,  however,  to  certain  conditions  stated  below. 

The  "B"  corporation  agrees  to  continue  trading  under  its 
old  management  on  behalf  of  and  at  the  expense  of  the  "A"  cor- 
poration until  December  31,  1905,  when,  if  the  profits  earned 
amount  to  less  than  $40,000.00,  the  "A"  corporation  reserves  to 
itself  the  right  to  cancel  the  agreement  for  purchase  on  payment 
of  the  difference  between  the  earnings  for  the  year  and  $40,000.00. 

At  December  31,  1905,  the  profits  for  the  year  earned  by 
the  "B"  corporation  amount  to  $50,000,  and  the  "A"  corporation 
actually  takes  over  the  "B"  corporation,  paying  $450,000.00  in  full 
settlement. 

Criticize  the  following  methods  of  treating  the  transaction, 
and  state  which  you  consider  correct  ,giving  reasons  for  your 
opinion : 

(a)  Debit  investment  account  with  $500,000.00  and  credit 
profit  and  loss  with  $50,000  earnings. 

(b)  Debit  investment  account  with  $450,000.00. 

(c)  Debit  Investment  Account  with  $500,000.00  and  credit 
special  reserve  account  with  $50,000.00. 

It  may  be  taken  as  an  ascertained  fact  that  the  assets  are  fully 
worth  $500,000.00  at  the  time  of  purchase  by  the  "A"  corporation. 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  A 


Code  :    Dingey 


TRIAL  BALANCE  OF  THE  GENERAL  LEDGER  OF 

JOHN  DOE,  CIVIL  ENGINEER, 

AT  DECEMBER  31,  1911 


Cash    $10,572.44 

Furniture  and   fixtures  1,054.68 

Real    estate    (Rutherford   home)     6,000.00 

Investments  in  stocks  15,157.50 

Investments  in  bonds  3,000.00 

Missouri  Pacific  Margin  account   13,000.00 

Accounts    receivable   15,331.32 

General  expense  9,800'.00 

Interest    1,060.00 


Manhattan   Construction   $  5,000.00 

Report  #1    Swanee   Creek   rail- 
road      6,300.00 

Report  #2   Englewood  reservoir     4,500.00 
Report  #3  Long  Acre  library....     3,200.00 

Connecticut  Tramways  Co 1,950.00 

Earnings — consulting    2,000.00 

Report  fees  16,000.00 

Sharp  &  Co.,  brokers  11,310.00 

Stocks  and  bonds  4,300.00 

Capital    21,745.94 


$75,305.94 


$75,305.94 


ANALYSES 

General  Expense — Salaries:  John  Doe  $6,000,  other  salaries  $1,800; 
rent  $1,000;  advertising  $600;  cables  and  telegrams  $90;  stationery 
and  printing  $110;  other  expenses  $200. 

Interest — Debited  with  $1,300  charged  by  Sharp  &  Co.,  brokers,  on 
margin  account ;  reduced  by  dividends  of  $390,  credited  by  Sharp  & 
Co.  on  margin  account.    Balance  on  loans  since  repaid. 

Manhattan  Construction  Co. — Represents  consulting  fees  received  dur- 
ing the  year  1911,  the  contract  running  from  month  to  month,  with 
no  expense  to  John  Doe. 

Reports  1-3 — Are  completed  and  delivered.  Account  contains  fees, 
less  expenses. 

Connecticut  Tramways  Co. — Represent  $2,000,  received  November  1, 
1911,  and  expenses  of  $50;  according  to  terms  of  contract,  John  Doe 
is  to  act  as  consulting  engineer  for  10  months  and  to  receive  alto- 
gether $5,000. 

Report  Fees — Fees  received  under  contract  for  report.  $9,000  received 
on  contracts  on  which  no  work  has  been  done;  balance  is  earned. 

Stocks  and  Bonds — Are  sold.    Account  represents  balance. 

Additional  Facts — Dividends  on  stocks  received  during  the  year 
amount  to  $1,985,  of  which  $1,000  was  applied  to  the  account  Invest- 
ment Stocks,  and  $985  was  applied  to  Stocks  and  Bonds  Sold. 

Prepare  (a)  bc\lance  .sheet  at  December  31,  1911,  with  your 
certificate  attached,  (b)  income  statement  showing  John  Doe's 
true  earning  power  as  a  civil  engineer. 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  A 


Code:    Dinner 

A  corporation  is  burned  out  of  its  factory,  and  leases  other 
property  for  a  long  term  of  years,  at  an  annual  rental  of  $6,000.00. 
Subsequently  the  owner  of  the  property  donates  $5,000.00  in  cash 
to  apply  on  the  cost  of  fitting  up  the  building  for  the  tenant's  use. 

Make  journal  entries  covering  the  donation  and  explain  its 
treatment. 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  A 


Code  :    Dip 

The  treasurer  of  ths  United  Manufacturing  Company  submitted 
the  following  figures,  taken  from  the  ledger  of  the  company,  as 
representing  the  condition  of  the  business,  December  31,  1915: 


Cash  - - $    7,500.00 

Accounts  receivable   45,000.00 

Notes  receivable 1,875.00 

Raw  materials  $  20,000.00 

L-abor  A-    30,000.00 

Manufactured  goods 16,250.00  -66,250.00 


$ 


Accounts  payable  

Notes  payable .- 

Capital  stock  

Surplus,  December  31,  1915. 


5,875.00 
20,000.00 
80,000.00 
14,750.00 


$120,625.00       $120,625.00 


A  comparison  of  the  above  statement  with  a  former  one  showed 
a  net  loss,  for  the  period,  or  $6,250.  The  directors  had  expected 
a  profit,  basing  their  expectations  on  the  resuh  obtained  by  apply- 
ing their  cost  calculations  to  the  volume  of  sales  for  the  period, 
and  they  employed  an  accountant  to  investigate  the  matter.  All 
the  nominal  accounts  had  been  closed  into  either  the  Merchan- 
dise Account  or  the  Profit  and  Loss  Account,  and  an  analysis  of 
these  accounts  disclosed  the  following : 

Inventory  at  beginning  of  period :  *  oo  cm  m 

Raw  material  ...* $  ^o  riv!r5^ 

Labor  «'nmm 

Manufactured  goods cnnmm 

Purchases  during  period „— - 59'95?n2 

I  ohor  ~ 87,50U.UU 

Wages  """i"i"";;i""-"";i..-~ 10,000.00 

Traveling  expenses,  commission,  etc ^n'^SSS 

Salaries   ^?'??^m 

Rent   o,/i)U.UU 

Bad  debts       6,375.00 

Depreciation   ^'52?-2S 

Interest          625.UU 

Sales     ...r."... 250,000.00 

Return  sales  7,500.00 

The  consumption  of  material  and  labor  shown  by  the  cost  rec- 
ords was: 

Material  ^  iS'SSSSS 

Labor  80,000.00 

Prepare  a  statement  showing  any  discrepancy  that  may  exist 
in  the  above  figures;  also  a  statement  of  income  and  profit  and 
loss,  and  a  statement  of  assets  and  liabilities  December  31,  1915. 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  A 


Code:    Diploma 

Two  piofessicnal  firms,  consisting  of  two  partners  each, 
agree  to  amalgamate.  Jones  and  Robinson  have  accounts  re- 
ceivable, $12,500.00  and  other  assets  taken  as  net,  $1,250.00.  Sikes 
and  Wilson  have  accounts  receivable,  $11,000.00,  and  other  as- 
sets net  $1,000.00,  each  firm  bringing  $2,500.00  in  cash  and  dis- 
charging their  own  liabilities,  with  an  arrangement  that  the  part- 
ners of  each  firm  shall  have  a  preferential  allowance  of  15  per 
cent  on  professional  fees  arising  from  the  connection  of  each  firm. 

At  the  end  of  twelve  months,  the  earnings  were  $49,500.00, 
of  which  $19,000.00  came  from  Jones  and  Robinson's  introduction, 
$23,000.00  from  Sikes  and  Wilson's  and  the  rest  from  neutral 
ground.  The  accounts  receivable  of  Jones  and  Robinson  were 
realized  at  an  average  loss  of  (>  per  cent ;  those  of  Sikes  and  Wilson 
at  5  per  cent.    The  expenses  were  $16,725.00. 

As  at  the  end  of  the  year,  make  out  the  Realization  Account 
of  each  firm,  the  Profit  and  Loss  Account  of  the  amalgamated 
firm,  and  the  Capital  Accounts  of  each  partner,  allowing  interest 
on  the  net  assets  and  cash  brought  in  at  5  per  cent  per  annum, 
but  none  on  the  accounts  receivable.  The  drawings  have  been: 
Jones,  $5,000.00;  Robinson,  $3,250.00;  Sikes,  $5,500.00 ; Wilson, 
$3,500.00,  without  interest. 

Profits  are  divided  as  follows :  Jones  and  Sikes,  three-tenths 
each;  Robinson  anJ  Wilson,  two-tenths  each.  The  same  propor- 
tions govern  the  divisions  of  assets  brought  in  and  the  preferen- 
tial allowances. 


Code  :    Diplomat 

On  December  1,  1907,  the  following  particulars  are  furnished 
of  the  position  of  John  Mapleton,  insolvent :  Factory  equipment 
cost  $15,000.00,  estimated  to  realize  $10,000.00.  Stock  of  finished 
goods,  $10,000,  estimated  worth  $7,500.00.  Material  and  supplies 
$2,500.00,  estimated  worth  $1,000.00.  Furniture  and  Fixtures 
$900.00,  estimated  worth  $200.00.  Investments  valued  at  $25,- 
275.00,  of  which  $15,000.00  is  held  by  bankers  as  security  for  loan 
of  $12,000.00.  Accounts  receivable,  $6,250.00,  of  which  $2,500.00 
are  good,  $1,250.00  bad,  and  $2,500.00  estimated  to  realize  $1,500. 
Cash,  $575.00,  of  which  $25.00  represents  petty  expense  items 
not  charged  up,  and  $50.00  an  I.  O.  U.  of  a  former  employe  which 
is 'worthless.  Accounts  payable,  $28,500.00.  Bills  Payable,  $25,- 
000.00,  of  which  $12,000.00  is  due  bankers.  Wages  due,  $500.00. 
Rent  due  and  past  due,  $1,000.00.  Capital  on  January  1,  1907, 
as  shown  by  books,  $15,000.00.  Loss  by  sale  of  investment  May 
1,  1907,  $5,000.00.  Loss  in  trading  account  January  11,  1907, 
to  December  1,  1907,  $3,500.00.  Drawings  charged  personal  ac- 
count of  John  Mapleton,  $1,000.00. 

Make  up  a  statement  of  aflfairs  and  a  deficiencv  account  as  on 
December  1,  1907. 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  A 

Code  :    Dipper 

Proposition  A.  In  1906,  a  manufacturer's  gross  sales 
amounted  to  $202,700.00,  against  which  his  outlay  was : 

Material $94,645.00 

Wages   61,725.00 

Shop  expense  17,135.00 

Administrative  expense  14,250.00 

State  the  ratios  of  the  several  features  of  departmental  ex- 
pense to  the  gross  sales ;  also  the  per  centum  of  profit. 

Proposition  B.    The  same  excepting,  gross  sales  $435,000.00 

Material $233,000.00 

Wages   88,840.00 

Shop  expense 27,825.00 

Administrative  expense  17,585.00 

Review  the  conditions  and  apparent  causes  that  result  in  the 
great  difference  shown  in  the  percentage  of  profit  between  the 
two  propositions. 


Code  :    Dipthong 

"A,  B"  &  Co.  agree  with  "C,  D"  &  Co.  that  the  latter  shall 
ship  on  consignment  to  Honolulu  on  joint  account  20  cases  of 
commodity  "X,"  the  invoice  price  of  which  is  $2,100,  less  2%  per 
cent.  "A.  B"  &  Co.  pay  the  packing  charges,  $25 ;  also  freight,  in- 
surance and  other  charges,  $90,  and  they  draw  on  their  correspon- 
dents in  Honolulu  in  advance  for  $1,600  at  90  days,  which  is 
discounted  at  a  cost  of  $20,  and  the  proceeds  handed  to  "C,  D" 
&  Co.  as  part  payment.  These  transactions  may  be  dated  March 
1st,  1909.  On  the  30th  of  November,  1909,  "A.  B."  &  Co.  receive 
the  account  sales  and  net  proceeds,  $418,  and  they  then  pay  "C,  D" 
&  Co.  the  balance  due  to  them. 

Prepare  a  Joint  Consignment  Account  charging  interest  on 
the  amount  lying  out  at  5  per  cent  per  annum  for  nine  months, 
closing  it  by  dividing  the  loss;  also  an  account  to  be  rendered 
by  "A,  B"  &  Co.  to  "C,  D"  &  Co.  closed  by  payment  of  the  bal- 
ance, and  proving  that  the  losses  borne  by  each  are  equal. 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  A 


Code  :    Dire 

Mr.  John  Allan  has  purchased  the  business  conducted  by 
Mr.  Hugh  Smith;  the  transfer  taking  place  on  January  1,  1916, 
the  consideration  being  $200,000.00  payable  in  cash.  The  balance 
sheet  at  the  date  mentioned  showed  as  follows : 


ASSETS 

Cash  on  hand $        100.00 

Cash  in  bank. 10,000.00 

Accounts    Receivable 50,000.00 

Notes    Receivable 10,000.00 

Inventories  of  Merchandise...  100,000.00 

Real  Estate,  Buildings,  etc 150,000.00 

Prepaid  Insurance,  Taxes,  etc.  3,000.00 

Board  of  Trade   Membership  1,800.00 


LIABILITIES 

Notes  Payable $  75,000.00 

Mortgage  on  Fixed  Assets....  100,000.00 

Accounts   Payable 25,000.00 

Mr.     Hugh     Smith,     Capital 
Account  124,900.00 


$324,900.00 


$324,900.00 


Under  the  agreement  above  mentioned,  the  cash  in  bank  be- 
longs to  Mr.  Smith,  while  the  accounts  and  notes  receivable  will 
be  collected  on  his  account.  The  notes  and  accounts  payable  will 
be  paid  by  the  purchaser,  but  are  recoverable  from  the  seller. 
You  are  asked  to  examine  the  balance  sheet,  to  make  the  neces- 
sary journal  entries  in  terms  of  this  agreement  and  to  prepare  a 
balance  sheet  to  show  the  position  as  taken  over  by  Mr.  Allan. 
As  a  result  of  your  examination,  you  ascertain  that  the  inventory 
is  understated  by  $10,000.00  and  that  the  prepaid  expenses  are 
overstated  by  $1,500.00.  On  your  recommendation  Mr.  Allan  has 
decided  to  incorporate  with  a  capital  of  $200,000.00,  of  which 
$100,000.00  will  be  7%  preferred  and  $100,000.00  common  stock. 

Prepare  a  balance  sheet  after  incorporation,  giving  effect  to 
all  the  transactions  just  enumerated. 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  A 


Code  :    Direct 

From  the  books  of  Messrs.  Deas  &  Alexander,  which  are 
kept  by  single  entry,  the  following  balance  sheet  as  at  June  30, 
1914,  was  taken : 

ASSETS  LIABILITIES 

Cash  in  Bank  and  on  Hand....$10,800.00  Accounts  Payable....                    $10,309.00 

Accounts   Receivable 16,032.00  Capital  Accounts: 

Inventories   29,980.00  Deas     $  3,263.00 

Building  and  Equipment 8,000.00  Alexander    51,240.00     54,503.00 

$64,812.00  $64,812.00 


It  was  agreed  that  the  partnership  would  be  dissolved  as 
at  October  31,  1914,  but  that  Alexander  would  continue  the  busi- 
ness. It  was  further  agreed  that  Deas  would  be  paid  the  balance 
t)  his  L  .dit  at  jun:  ,.(),  1914,  together  with  a  sum  of  $5,000.00 
to  cover  his  interest  in  the  goodwill  of  the  business  and  his  profits 
up  to  October  31,  1914,  which  latter  was  estimated  at  $1,200.00 
From  this  amoiuit,  however,  his  drawings,  amounting  to  $800.00 
were  to  be  deducted. 

The  following  balances  were  shown  on  the  books  at  June 
30,1915: 

Cash  in  Bank  and  on  Hand $  8,130.00 

Accounts  Receivable  12,203.00 

Inventories  - 29,143.00 

Buildings  and  Equipment 8,103.00 

Accounts  Payable  8,706.00 


You  ascertain  that  on  April  30,  1915,  merchandise  valued 
in  the  books  at  $500.00  was  destroyed  by  fire.  As  this  loss  was  not 
covered  by  insurance,  Mr.  Alexander  reduced  the  book  value  of 
his  inventory  to  take  care  of  the  loss. 

The  additions  to  Buildings  and  Equipment  during  the  year 
cost  $503.00,  but  the  book  value  of  these  assets  was  reduced 
by  the  sum  of  $400.00  to  take  care  of  depreciation. 

Alexander's  personal  drawings  during  the  year  amounted  to 
$2,500.00. 

You  are  instructed  to  prepare  a  balance  sheet  for  Alexander 
as  at  June  30,  1915,  together  with  statement  showing  profit  or 
loss  for  the  year  and  the  distribution  of  same.  You  are  also 
required  to  write  up  Alexander's  capital  account  for  the  year  to 
June  30,  1915. 

No  value  is  to  be  placed  on  the  goodwill. 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  A 


Code  :    Direction 

A  company  issues  serial  bonds  in  the  sum  of  $600,000.00, 
$100,000.00  being  payable  one  year  after  date  of  issue  and  $100,- 
000.00  each  year  thereafter.  The  bonds  bear  5%  interest  and  are 
sold  at  a  flat  rate  of  90.  What  is  the  average  rate  of  interest  paid, 
without  considering  the  question  of  interest  on  interest? 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  A 

Code:    Director 

Owing  to  a  rapid  growth  of  the  business,  the  "A,  B"  Com- 
pany found  it  necessary  to  raise  additional  funds,  and  accordingly 
on  January  1,  1911,  it  entered  into  an  agreement  with  a  bond 
house  for  an  issue  of  $500,000.00  First  Mortgage  C)  per  cent  Gold 
Bonds,  v/hich  were  ultimately  sold  to  the  bond  brokers  at  95  per 
cent  of  par ;  the  company  also  paying  as  additional  compensation 
to  the  brokers,  a  commission  of  2  per  cent.  The  expenses  of  the 
issue,  including  legal  expenses  for  drawing  the  mortgage,  etc.,  cost 
of  engraving  the  bonds  and  trustees'  fee,  were  $10,000.00,  the  net 
proceeds  of  the  issue  being  finally  paid  over  to  the  company's 
treasurer.  During  the  year  1911,  the  company  made  net  profits 
of  $150,000.00  after  providing  or  setting  aside  $50,000.00  for  the 
depreciation  and  obsolescence  of  properties,  and  it  also  paid  a 
dividend  to  stockholders  of  $50,000.00.  The  real  estate  was  also 
appraised  during  the  year  at  an  increased  valuation  of  $25,000.00, 
which  was  credited  to  Surplus  account.  The  financial  position  of 
the  company  on  Jan.  1,  1911,  before  the  bond  issue  was  negotiated, 
and  again  on  December  31,  1911,  the  end  of  the  company's  fiscal 
year,  are  set  out  below,  from  which  you  are  requested  to  prepare 
a  brief  and  intelligent  statement  showing  what  was  done  with  the 
new  funds  provided  as  indicated  above. 

A.  B.  CO.  BALANCE  SHEET 

January  1,  1911  December  31,  1911 

Capital  Stock  $  $  250,000.00    $  $  250,000.00 

6  per  cent  1st  Mtg. 
Gold  Bonds  500.000.00 

Real   Estate  50,000.00  75,000.00 

Btiildin  g  s,     Plant 
Equipment,  at  cost     300,000.00  425,000.00 

Inventories  at  cost....     200,000.00  350,000.00 

Accts.  Receivable  ....      150.000.00  •  245,000.00 

♦M'k'able  Securities..       50,000.00 

Advances   on    build- 
ing contracts  20,000.00 

Cash  on  hand  and  in 
bank   35,000.00  85,00^00 

Notes  payable 
Bankers'   loans   ....  200,000.00 

Accounts  payable  ....  150,000.00  100.000.00 

Depreciat'n   reserve..  •  75,000.00  125,000.00 

Expense  bond  issue..  10.000.00 

Surplus    110,000.00  235.000.00 

$   785  033.03    $   785,000.00    $1,210,000.00    $1,210,000.00 


*  Sold  during  year  for  $40,000.00,  loss  of  $10,000.00  being  charged  off  to 
Profit  and  Loss  Account. 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  A 


Code  :    Dircie  * 

A.  Wells,  a  manufacturer  of  novelties,  is  joined  by  I.  M. 
Anxious  in  partnership  upon  the  following  terms : 

A.  Wells  is  to  receive  a  monthly  salary  of  $100  for  the  first 
year,  which  shall  be  a  first  charge  upon  the  profit,  after  pro- 
viding for  the  usual  business  expenses,  and  before  reckoning  3% 
upon  the  partner's  capital.  In  the  event  of  such  profit  during 
the  first  year,  or  any  subsequent  year,  not  exceeding  6%  of  the 
total  capital  (after  payment  of  the  salary),  this  salary  shall  be 
reduced  to  $75.00  per  month  the  following  year,  and  remain  so 
•until  the  yearly  profits  advance  to  more  than  6%,  when  such  salary 
shall  return  to  $100,  commencing  the  year  succeeding  the  one 
showing  the  required  increase  of  profit.  Should  the  profit  in  any 
one  year  amount  to  more  than  10%  on  capital,  A.  Wells  shall  be 
entitled  (in  addition  to  the  salary  he  has  received  for  that  year) 
to  a  bonus  of  3314%  upon  any  sum  in  excess  of  $1,500.00,  and 
25%  upon  any  further  excess  and  this  bonus  shall  be  a  charge 
against  profit,  before  allotting  the  interest  at  3%  upon  capital. 
Any  profit  then  remaining  shall  be  divided  equally.  From  the 
following  particulars,  construct  separate  capital  accounts  for  the 
partners  for  five  years.  Starting  capital:  A.  Wells,  $6,000.00; 
I.  M.  Anxious,  $5,000.00. 

1st  Year $1,750.00 

2nd  Year  1,800.00 

3rd  Year  4,250.00 

4th  Year  5,000.00 

5th  Year  5,500.00 

No  drawings  on  account.  Distribution  of  profits  when  ascer- 
tained. 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  A 


Code  :    Dirk 

The  Get-Rich  Book  Company,  a  corporation,  goes  into  volun- 
tary liquidation  and  the  directors  of  the  company,  three  in 
number,  are  designated  as  trustees  in  liquidation. 

Below  is  a  trial  balance  of  the  company  as  of  June  28,  1912, 
the  date  when  its  affairs  were  turned  over  to  the  trustees : 

1  Capital  Stock  $  $  20,000.00 

2  Cash  553.69 

3  Office  Furniture  1,666.92 

4  Meter  Deposit  ~ 60.00 

5  Accounts  Receivable  26,153.95 

6  Rogers  &  Co.,  monies  collected  for  their  acct 14,738.00 

7  Notes  Payable  27,573.50 

8  Accounts  Payable  4,197.22 

9  Merchandise  Purchased  27,404.74 

10  Merchandise  Sales  8,045.35 

11  Expense  10,751.97 

12  Loss  and  Gain 7,962.80 

$  74,554.07    $  74,554.07 


Value   of   Merchandise   on   hand,  $20,183.86 ;   other  assets, 

(items  3,  4  and  5),  valued  as  in  ledger.    Trustees'  cash  receipts 

and  payments  as  follows: 

RECEIPTS 

Balance  on  hand $     553.69 

Meter   Deposit    60.00 

Office  Furniture  sold  487.90 

Accounts  Receivable  collected  22,872.75 

Additional  Collections  for  Rogers  &  Co 1,965.24 

Sales  of  Merchandise  22,090.70 

Commission  received  from  Rogers  &  Co 6,703.24 

PAYMENTS 

Notes  paid  $27,573.50 

Accounts  paid  - 4,197.22 

Merchandise  bought  562.55 

Expenses  5,697.01 

Remitted  Rogers  &  Co.  in  full , 16,703.24 

Accounts  Receivable  not  collected  are  worthless.     Prepare 
the  accounts  of  the  trustees  in  liquidation. 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  A 


Code:    Dirt 

Three  brothers,  "A,"  "B,"  and  "C,"  own  all  the  capital 
stock  (each  1-3)  of  a  certain  corporation  "X."  They  own  also, 
but  not  equally,  55%  of  the  capital  stock  of  a  kindred  corporation, 
"Y,"  which  is  capitalized  for  $100,000,  the  par  value  of  the  shares 
being  $10.  The  holdings  of  each  in  the  "Y"  corporation  are  as 
follows : 

A  2222  shares 

2 2222       " 

C  ZZIZZZZ'ZZZZZZ 1056       " 

The  three  brothers,  acting  as  the  corporation  "X,"  purchase 
out  of  corporate  funds  the  remaining  45%  interest  in  the  corpora- 
tion "Y,"  paying  $100,000  therefor.  Without  further  cost  to 
"X"  they  now  wish  to  merge  the  two  corporations  under  the  cor- 
porate name  "X"  and  dissolve  "Y." 

"C"  proposed  to  make  compensation  to  "A"  and  "B"  individ- 
ually for  an  equal  interest  in  the  5,500  shares  upon  the  same  basis 
as  the  45%  interest  was  acquired  so  that  all  may  share  equally 
in  the  merged  properties. 

How  much  should  "C"  pay  to  each  of  the  other  stockholders? 
Outline  the  entries  necessary  to  record  all  the  above  stated  trans- 
actions on  the  books  of  "X"  and  "Y." 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  A 


Code  :    Disable 

A  factory  consists  of  two  blocks  of  buildings,  "A"  and  "B." 
On  the  first  of  January,  1907,  "A"  contains  engine  and  boiler 
which  cost  $4,000,  and  machinery  costing  $13,000 ;  "B"  contains 
machinery  costing  $7,000.  The  following  are  purchases  of  ma- 
chinery: October  1st,  1907,  "A,"  $1,000;  July  1st,  1908,  "A," 
$750;  "B,"  $1,500;  April  1st,  1909,  "A,"  $600;  "B,"  $900;  Octo- 
ber 1st,  1909,  "B,"  $250. 

On  January  1st,  1908,  machinery  (costing  January  1st,  1907, 
$1,000)  is  sold  from  "A"  for  $625,  and  on  July  1st,  1908,  ma- 
chinery (costing  $1,300  January  1st,  1907)  is  sold  from  "B"  for 
$1,000. 

The  accounts  are  made  up  to  December  31st  of  each  year.  On 
December  31st,  1909,  the  whole  premises  and  contents  are  de- 
stroyed by  fire,  and  the  fire  insurance  company  agrees  to  pay 
upon  the  following  basis:  engine  and  boiler,  cost  price,  less  de- 
preciation 8  per  cent  per  annum  upon  that  sum;  machinery  in 
"A,"  cost,  less  depreciation  at  10  per  cent  per  annum  upon  dimin- 
ishing values;  machinery  in  "B,"  cost,  less  depreciation  at  7% 
per  cent  per  annum  upon  diminishing  values. 

Prepare  ledger  accounts  showing  how  much  is  recoverable 
upon  this  basis. 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  A 


Code  :    Disadvantage 


The  following  is  a  trial  balance  taken  from  the  books  of  the 
Haven  Manufacturing  Company,  December  31,  1915: 


TRIAL  BALANCE 

Accounts  payable  $ 

Accounts  receivable  

Bonding  of  employees   (office) 

Capital  stock  

Cartage  outward 

Cartage  inward  

Cash   

Cash  discounts  on  sales 

Cash  discounts  on  purchases 

Collection  and  exchange 

Directors'  fees  

Employers  liability  premiums 

Factory  expenses  

Freight  outward  

Freight  inward  

Finished  goods  inventory,  Jan.  1,  1915.... 
Insurance,  machinery,  tools  and  patterns.. 

Interest,  general  

Labor,  productive  

Labor,  unproductive 

Machinery  and  tools  

Notes  payable  - — 

Notes  receivable  

Office  pay  roll  

Office  furniture  and  fixtures 

Postage   

Power 

Patterns   

Patents   

Purchases •■ 

Raw  material  inventory,  January  1,  1915 

Return  sales   

Repairs,  machinery 

Sales    

Sales  allowances  

Salesmen's  traveling  expenses 

Salesmen's  commissions  and  salaries 

Salesmen's  expenses  

Salaries,  officers  .-. 

Stationery  and   printing 

Surplus  

Taxes,  income  and  personal 

Telegrams  and  telephones 

Trade  discounts  on  purchases 

Trade  discounts  on  sales 


625,000.00 
625.00 

""i6,'750."00 

9,375.00 

112,500.00 

7,000.00 

i;75a66 

3,750.00 

10,000.00 

7,525.00 

25,000.00 

57,500.00 

87,500.00 

1,250.00 

11,175.00 

750,000.00 

87,500.00 

121,250.00 

7;625'o6 

45,000.00 

14,250.00 

5,000.00 

52,500.00 

31,000.00 

52,500.00 

1,026,625.00 

100,000.00 

102,500.00 

3,275.00 

'""27"2iom 

43,750.00 

100,000.00 

5,000.00 

37,500.00 

7,625.00 

2;5o6;oo 

4,500.00 
3;075."o6 


$     107,500.00 
500,000.00 


3,000.00 


«-i 


247,625.00 


2,621,250.00 


108,800.00 
12,750.00 


$  3,600,925.00     $  3,600,925.00 


On  December  31,  1915,  the  inventories  were: 

Raw   material  ^^7c'^nn 

Finished  goods  75,000.00 

Prepare  a  statement  of  income  and  profit  and  loss,  in  report 
form,  and  a  statement  of  assets  and  liabilities,  December  31,  1915. 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  A 


Code  :    Disaffirm 

A  corporation  decided  to  issue  and  sell  bonds  to  the  amount  of 
$100,000.00  par  value.  The  denomination  of  such- bonds,  $1,000.00 
each;  term  of  bonds,  fifteen  (15)  years;  interest  rate  5%,  payable 
semi-annually.  On  January  1,  1914,  these  bonds  were  sold  for 
?105,411.33,  or  on  a  41/2%  return  basis.  July  1,  1914,  interest 
was  paid  amounting  to  $2,500.00. 

(a)  What  entry  should  the  corporation  have  made  when  the 

bonds  were  sold? 

(b)  What  entry  should  the  corporation  have  made  when  it 

paid  the  $2,500.00  interest  referred  to  above? 

(c)  What  entry  should  the  purchaser  of  these  bonds  have 

made  when  he  received  the  first  interest  pa)rment  ? 

(d)  Sketch  the  form  of  a  bond  ledger  which  will  provide 

the  purchaser  of  these  bonds  with  a  perpetual  detail 
record  of  this  bond  transaction. 


M 


Code  :   Disagree 

The  Good  Music  Company  sells  pianos  on  the  installment 
basis.  On  January  2,  1914,  Jones  purchased  a  piano  from  the 
company  for  $375.00,  to  be  paid  for  as  follows :  $25.00  down  and 
the  balance  in  quarterly  installments  of  $50.00  each,  bill  of  sale 
to  be  given  on  date  of  final  payment.  The  piano  cost  the  company 
$125.00.  The  four  installments  for  1914  were  duly  received,  the 
last  one  having  been  paid  on  December  31st. 

(a)  Set  up  the  proper  ledger  accounts  covering  this  sale  and 

the  payments  thereon. 

(b)  Give  the  journal  entry  (at  the  close  of  the  year)  by  which 

the  year  will  be  credited  with  its  proper  proportion 
of  the  profit  on  this  transaction. 

(c)  Sketch  the  ruling  of  a  book  or  books  which  might  be  used 

to   facilitate   the   handling  of  installment  sales   and 
collections. 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  A 


Code  :    Disappear 

A  certain  railroad,  being  about  to  be  foreclosed  under  a  con- 
solidated deed  of  trust,  a  committee  of  the  conslidated  bondhold- 
ers, the  members  of  which  were  large  holders  of  stock  and  prior 
bonds,  drafted  *'a  plan  for  purchase  and  reorganization,"  effective 
Jan.  1,  1880.  This  provided  that  the  old  stock  should  be  de- 
posited, and  that  the  new  company  should  issue  ( 1 )  first  mortgage 
i)%  bonds  to  be  used  to  find  the  past  due  and  maturing  interest 
on  the  prior  bonds  and  for  permanent  construction  and  improve- 
ment;  (2)  preferred  7%  stock  to  represent  the  par  value  of  out- 
standing consolidated  bonds;  and  (3)  common  stock  to  represent 
the  outstanding  common  stock.  Holders  of  the  common  stock 
were  not  to  be  entitled  to  shares  or  to  vote  until  preferred  stock 
had  paid  five  successive  annual  dividends  of  7%.  A  reincorpora- 
tion was  effected  oi  this  basis.  At  the  end  of  five  years  the 
common  stockholders  brought  action,  setting  forth  that  earnings 
and  income  which  had  been  wrongfully  converted  to  pay  for 
improvements  and  extensions,  would,  if  applied  to  dividends, 
have  been  sufficient  to  pay  for  five  successive  dividends  of  7% 
each  on  the  preferred  stock,  and  that  the  common  stockholders 
were  therefore,  entitled  to  representation. 

The  net  earnings  as  reported  by  the  company  were  as  follows : 

Net  earnings  for  1880. $133,084.69 

Net  earnings  for  1881 244,037.94 

Net  earnings  for  1882 438,989.89 

Net  earnings  for  1883 488,799.13 

Net  earnings  for  1884 400,303.40 

Net  earnings  for  1885 272,451.77 

In  1881  steel  rails  were  laid.  The  cost  of  this,  less  the  value  of 
old  rails  removed  was  $133,779.03,  all  of  which  sum  was  charged 
to  operating  expenses.  In  1882  a  similar  charge  was  made  to  the 
amount  of  $31,224.50.  In  1883,  of  $65,000.00  ;  in  1884,  $10,000.00 ; 
in  1885,  $9,996.35. 

In  1881  new  sidings  and  spurs  were  charged  to  operating 
expenses  to  the  amount  of  $45,430.00.  In  1882  the  amount  so 
charged  was  $9,640.00;  in  1883,  $16,960.00;  in  1884,  $11,640.00; 
in  1885,  $5,400.00. 

In  1883  two  steamers  owned  by  the  company  were  enlarged 
and  made  more  efficient,  at  a  cost  of  $40,286.44,  which  was  paid 
out  of  and  charged  to  earnings. 

In  the  spring  of  1884,  $142,000.00  was  expended  for  8  new 
freight  engines  and  200  coal  cars.  The  funds  for  this  purchase 
were  raised  by  loan,  which  was  paid  off  by  the  company  at  the 
rate  of  $3,000.00  per  month  and  the  sum  so  paid  in  addition  to 
interest  on  the  loan  was  charged  to  operating  expenses  and  with- 
drawn from  earnings.  $15,000.00  was  thus  charged  in  1884  and 
$36,000.00  in  1885. 

The  amount  of  preferred  stock  on  which  the  7%  was  to  be 
paid  annually  was  $6,500,000.  Make  out  a  statement  showing 
whether  or  not  the  common  shareholders  were  entitled  to  repre- 
sentation on  Jan  1,  1886.  (Problems  in  Accounting,  by  David 
Friday. ) 

For  class  uniformity,  compute  depreciation  as  follows :  Rails, 
7Vl>%  ;  sidings  and  spurs,  4%  ;  steamers,  4%  ;  freight  engines  and 
coal  cars,  5%  ;  all  on  original  cost. 


«A 


•« 


PRACTICAL   PROBLEMS.  GRADED,  SERIES  A 


Code:    Disappoint 

From  the  following  information  prepare: 

1.  Income   and   Expenditure  account — year  to   March   31, 

1917. 

2.  Comparative  Balance  Sheet,  March  31,  1917,  and  March 
31,  1916. 

3.  Stores  Account,  showing  operations  (and  profit  or  loss) 
for  year  to  March  31,  1917. 

4.  Investment  or  Capital  Account — year  to  March  31,  1917. 


RECEIPTS 
Cash   on   hand, 

AiJiii    1,    i!fi  > 

Dues— Collected  .../$12,318.75 
Stores   2,989.80 


Initiation    Fees 

Miscellaneous    

Employees'     Christ- 
mas  Fund 


5      617.63 

15,308.55 

300.00 
370.78 

470.50 

17,067.46 


DISBURSEMENTS 

Lunches    $  2,063.34 

Entertainment  25.00 

Tournaments  41.25 

Repairs   889.12 

Printing,    Postage, 

etc  350.50 

Wages — S  t  e  w  a  r  d 

and  Help 4,011.50 

Lisjht   625.68 

Heat  and    Fuel 599.75 

Taxes  and  Assess- 
ments        1,462.35 

Certificate  of  Life 
Membership  Pur- 
chased            160.00 

Stores   2.691.30 

Papers  and  Period- 
icals            199.15 

House  Expense........     1,590.37 

Furniture  and  Fix- 
tures— New  511.84 

Insurance    437.06 

Improvements  on 

Property   359,30 

Employees'      Christ- 
mas Fund  Distrib 
uted    460.00 


Cash  on  hand  and 
in  bank  March 
31,    1917— 


ASSETS  AT  MARCH  31,   1916: 

Real    Estate 

Permanent  Improve- 
ments    

Furniture  and   Fix- 
tures     

Accounts      Receiva- 
ble— Current    

Accotmts      Receiva- 
ble— •Delinquent- 
Accounts      Receiva- 
able — Christmas, 
Fund* 

Notes    Receiv  able 
for    Dues    

Stores — Inventory .. 

Stores — due       from 
Members     

Cash  on  hand 


26,400.00 

40.18.3.71 

12,208.60 

137.50 

47.60 

5.25 

255.00 
147.63 


231.20 
617.63 


LIABILITIES    AT 
Accounts       Payable 

for  Stores 

Dues    Paid    in    Ad- 
vance          

MARCH 
124.73 
412.50 

80,236.02 
31,    1916 

537  23 

Balance  —  March 
31,    1916 

79,698.79 

At  March  31,  1917, 
the  Accounts  Re- 
ceivable,     etc., 

16,477.51 

were: 
Accounts      Receiva- 
ble— Delinquent- 
Notes    Receiv  able 

for     Dues 

Stores  —  Due   from 

Members    

Stores —  Inventory.. 

63.75 

120.00 

317.45 
326.04 

589.95 


The  Dues  paid  in 
advance  amount- 
ed to 


30.00 


17,067.46 


PRACTICAL   PROBLEMS,  GRADED,  SERIES  A 


Code  :    Disapprove 

Prepare  from  the  following  figures,  as  if  for  a  meeting  of 
creditors,  a  Statement  of  Affairs  of  Brown  &  Company: 

Cash  at  bank,  $500.00 ;  cash  in  hand,  $50.00 ;  present  value  of 
lease,  $5,000.00,  upon  which  a  loan  of  $2,500.00  has  been  obtained ; 
debtors  good,  $10,000.00 ;  ditto  doubtful,  $1,500.00,  which  it  is  ex- 
pected will  produce  $750.00;  ditto  bad,  $2,500;  creditors  unse- 
cured on  open  accounts,  $40,000.00;  creditors  on  bills  payable, 
$10,000.00;  stock-in-trade,  cost  $20,000.00,  estimated  to  realize 
$12,000.00;  plant  and  machinery,  cost  $12,500.00,  estimated  to 
produce  $6,000.00;  credit  for  an  advance  of  $4,000.00,  holding 
security  valued  at  $1,750.00;  liabilities  on  accommodation  bills  of 
exchange,  $15,000.00,  of  which  it  is  expected  $7,500.00  will  rank 
for  dividend ;  liabilities  on  bills  discounted  $20,000.00,  of  which  it 
is  expected  $3,500.00  will  rank  for  dividend;  creditors  for  rent 
and  wages,  $250.00.     ( Footing  $341,000. ) 

As  the  statement  of  affairs  referred  to  above  shows  insolvency 
prepare  Trading  and  Deficiency  Accounts  from  certain  facts  there- 
in disclosed,  and  from  the  following : 

Capital  at  commencement,  $12,500.00  ;  sales,  $270,000.00  ;  loss 
on  shipment  to  Cape  Town,  $7,000.00;  purchases,  $241,000.00; 
drawings,  $14,000.00;  wages  (manufacturing)  $15,000.00;  trade 
charges  and  expenses,  $30,000.00 ;  profit  on  purchase  and  'sale  of 
shares,  $1,750.00. 


Code  :    Disarm 

A  railroad  company  known  as  '*A"  leased  for  fifty  years  the 
property  of  a  smaller  railroad  company  known  as  **B"  and  guar- 
anteed the  G  per  cent  coupons  on  the  latter's  bonds  and  their  face 
and  a  sinking  fund  against  them  of  1  per  cent  per  annum;  each 
yearly  installment  to  be  $30,000.00  in  cash  or  in  bonds  at  par  of 
"B."  After  the  lapse  of  twenty  years,  when  "B's"  bonds  were 
at  a  premium  of  18  per  cent,  "A"  was  found  to  be  in  arrears  on 
the  sinking  fund  for  five  installments,  the  fifth  one  having  just 
matured  due,  aggregating  $150,000.00.  In  settlement  of  such 
arrears  ''A"  offers  to  pay  "B"  in  cash  such  sum  as  would  make 
"B"  whole,  the  same  as  if  no  lapses  in  payments  had  occurred. 
"B"  refuses  the  offer  and  proposes  that  "A"  shall  pay  into  the 
sinking  fund  $150,000.00  in  bonds.  During  the  five  years  money 
ruled  at  an  average  of  4  per  cent. 


PRACTICAL   PROBLEMS,  GRADED,  SERIES  A 


Code  :    Disband 

The  fiscal  year  of  a  manufacturing  company  ends  June  30, 
1908,  and  the  bookkeeper  presents  a  statement  to  the  directors 
made  up  in  the  following  form : 

Gross  Sales $285,000.00 

Increase  in  Inventory  15,000.00 

$300,000.00 

Cost  of  Sales: 

Operating  expenses,  material  and  supplies $257,000.00 

Plant  expense  12,000.00 

Freight  on  returned  goods 600.00 

Sundry  purchases  finished  goods 10,400.00 

$280,000.00 

Manufacturing  Profit  $  20,000.00 

Other  Income : 

Miscellaneous  earnings $     1,500.00 

Profit  on  contracts  .— 6,500.00 

Discount  on  purchases  500.00 

$    8,500.00 

$  28,500.00 
Less: 

Discount  on  sales  $    2,875.00 

Rebates  and  allowances  1,125.00 

$    4,000.00 

Net  Plant  Profit  $  24,500.00 

Less : 

General  expenses  $    5,500.00 

Interest 1,500.00 

7,000.00 

Net  Profit  $  17,500.00 

You  are  required  to  make  up  a  Profit  and  Loss  statement  in 
regular  form,  showing  purchases,  etc.,  and  using  such  of  the  above 
figures  as  may  be  necessary  together  with  those  following:    In- 
ventory June  30,  1907— Material,  $115,000;  Supplies,  $35,000; 
Finished  Goods,  $45,000.     Inventory,  June  30,  1908— Material 
$140,000 ;  Supplies,  $10,000 ;  Finished  Goods,  $60,000 ;  Material 
used  in  factory  during  the  year,  $75,000 ;  Wages,  $122,500 ;  Fuel, 
$2,500 ;  Repairs  and  Renewals,  $2,000 ;  Other  operating  expenses, 
$55,000,  which  includes  $25,000  supplies  used. 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  A 


Code  :    Disburse 

On  Aug.  20th  John  Doe  put  in  Richard  Roe's  store  on  joint 
account,  merchandise  amounting  to  $3,240.00,  Roe  adding  the 
same  amount. 

Aug.  25th,  they  buy  on  joint  account  merchandise  amounting 
to  $9,000.00,  each  partner  paying  his  share  in  cash. 

Aug.  28th,  they  put  into  the  account  $4,000.00.  Roe  puts  in 
of  this  amount  $2,500.00  in  merchandise  from  his  store.  Doe  puts 
in  $1,500.00  in  merchandise  from  his  store,  and  pays  Roe  $500.00 
in  cash  to  share  equally  in  this  investment. 

Sept.  10th,  Roe  sells  on  their  joint  account  merchandise 
amounting  to  $9,500.00. 

On  the  same  date  by  agreement  they  withdrew  $6,480.00  in 
merchandise,  each  one-half,  $3,240.00. 

Sept.  22nd,  Roe  sells  to  John  Green  on  account  merchandise 
amounting  to  $4,800.00. 

Oct.  4th,  Roe  sold  to  Green  &  Joyce  50  shares  of  his  own 
Merchants'  Bank  stock  for  $5,500.00,  and  bought  of  them  in  part 
payment  merchandise  amounting  to  $5,000.00  for  joint  account 
of  himself  and  Doe,  receiving  the  balance  in  cash,  $500.00. 

Oct.  25th,  they  agreed  to  close  their  speculation  and  joint  ac- 
count and  they  each  take  delivery  of  one-half  of  the  merchandise 
remaining  unsold.    Total  amount  unsold,  $5,000.00. 

Write  the  journal  entries  necessary  to  present  these  transac- 
tions on  Roe's  books. 

Prepare  ledger  account.  Roe  charges  commission  on  sales 
2%%,  and  remits  Doe  one-half  of  the  net  proceeds  in  cash. 

Show  journal  entries  closing  the  ledger  account  on  Roe's 
books. 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  A 


Code:    Discern 

The  balance  sheet  of  a  certain  institution  as  at  the  close  of 
business,  December  31,  1913,  which  had  been  prepared  by  an  ac- 
countant, appeared  as  follows : 


ASSETS 

Cash  $30,344.94 

Accounts  Receivable  for  Food  44.39 

Accrued    Interest 500.00 

Office    Supplies   6.85 

Sundry  Food   Supplies 1,226.72 

Investments — at  cost  10,095.00 

Furniture  and   Fixtures 300.00 


LIABILITIES 
Accounts  Payable: 

Office  Supplies $  2.00 

Food  Supplies  480.00 

Nurses'   Salaries 680.50 

Laundry  and  Cleaning 28.00 


Total  $42,517.90 


1,190.50 

Note  Payable 5,000.00 

Surplus  36,827.40 


Total   $42,517.90 

The  accounts  included  in  the  foregoing  balance  sheet,  with 
the  exception  of  "Cash,"  are  not  incorporated  in  any  books  of 
the  organization,  as  the  only  record  maintained  is  a  cash  receipt 
and  disbursement  book. 

You  were  instructed  to  audit  the  cash  book  for  the  year  ended 
December  31,  1914,  and  found  the  cash  receipts  and  disburse- 
ments for  the  year  to  be  made  up  as  follows : 

Receipts : 

Contributions  $  25,330.68 

Special  Campaign  6,800.00 

Sale  of  Food  Supplies 1,352.32 

Bank  Loan  10,500.00 

Sub-rentals  _ 77.00 

Interest  on  Investments 850.00 

Bonds  sold,  including  accrued  Interest  at  $25.00 5,010.00 


Total  Receipts  $  49,920.00 

Disbursements : 

Station  Expenses  $    6,103.76 

Food  Supplies 1 ,821 .00 

General  Expenses 12,262.20 

Loan  Repaid 5,000.00 

Interest   638.50 

Office   Supplies  15.00 

Nurses'  Salaries 19,820.00 

Laundry  and  Cleaning „ 720.00 

Bonds  purchased  at  cost 28,020.00 

Interest  accrued  on  above  bonds 215.00 


Total  Disbursements  $  74,615.46 

From  the  information  available  at  the  close  of  your  examin- 
ation you  ascertain  the  following  facts : 

Accounts  Receivable  for  Food  amounted  to $  58.20 

Accrued  Interest  on  Investments  amounted  to 756.00 

Office  Supplies  Inventory  amounted  to 10.00 

Food  Supplies  Inventory  amounted  to  926.50 

The  original  cost  of  the  bonds  sold  during  the  year  was 4,965.00 

Unpaid  invoices  for  food  supplies 360.20 

Nurses'  Salaries  unpaid  923.50 

You  are  required  to  prepare  a  revenue  and  expenditure 
statement  for  the  year  ended  December  31,  1914,  and  a  balance 
sheet  as  at  the  close  of  the  year. 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  A 


«> 


Code  :    Discharge 

John  Jones,  William  Brown,  and  Alexander  White  are 
partners  in  a  business,  their  respective  interests  in  the  profits 
of  the  business  being  five-tenths,  four-tenths  and  one-tenth.  It 
is  agreed  between  the  partners  that  Mr.  Jones'  son  be  taken 
into  the  business  as  at  January  1,  1916,  on  the  understanding 
that  White's  interest  in  the  business  be  increased  to  12%,  which 
increased  share  is  now  considered  to  be  applicable  to  the  four 
previous  years,  while  the  shares  of  Mr.  Jones  and  Mr.  Brown  are 
to  be  40%  and  39%  respectively,  while  Mr.  Jones'  son  is  to  be 
given  9%  interest  in  the  profits  of  the  business.  It  is  further 
agreed  that  the  value  of  the  goodwill  of  the  business,  amounting 
to  $50,000.00,  be  set  up  on  the  books.  This  amount  is  to  be 
divided  between  Mr.  Jones  and  Mr.  Brown  in  proportion  to  their 
original  interests  in  the  profits.  Mr.  Jones  is  to  transfer  the  sum 
of  $6,000.00  to  his  son's  credit,  which  will  be  in  addition  to  the 
sum  to  be  allowed  him  out  of  profits  of  previous  years.  The 
profits  divided  during  the  four  years  to  December  31,  1915, 
were  as  follows:  1912,  $41,030.00;  1913,  $49,000.00;  1914,  $52,- 
000.00;  1915,  $48,000.00. 

The  balances  at  credit  of  the  capital  accounts  at  December 
31,  1915,  were:  John  Jones,  $230,310.00;  William  Brown,  $185,- 
112.00  ;  Alexander  White,  $21,809.00. 

Prepare  a  detailed  statement  showing  the  balances  at  credit 
of  the  various  partners  on  January  1,  1916,  after  giving  effect 
to  the  provisions  of  the  new  partnership  agreement  as  above 
indicated.    Ignore  any  question  of  interest. 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  A 


Code  :   Disciple 

From  the  following  trial  balance  of  the  A.  B.  Stevens  Manu- 
facturing Co.,  prepare  a  Balance  Sheet  as  at  December  31,  1915, 
and  a  Statement  of  Profits  for  the  year. 

Accounts   Payable   $  $  15,000.00 

Accounts  Receivable  70,000.00 

Accrued  Taxes  1,200.00 

Advertising 3,000.00 

Allowances  2,200.00 

Capital  Stock  100,000.00 

Cash  .- 15,000.00 

Depreciation  of  Equipment  3,500.00 

Discount  on  Sales  3,100.00 

Discounts  Received  1,800.00 

Electricity  1,300.00 

Factory  Supplies  and  Expenses 3,600.0(J 

Freight  on  Purchases  9,000.00 

Income  from  Bonds 1,000.00 

Insurance    300.00 

Interest  Paid  '. 300.00 

Inventory  December  31,  1914 50,000.00 

Investment  in  Bonds 15,000.00 

Notes  Payable— secured  by  deposit  of  $15,000.00  of 

Bonds  10,000.00 

Office  Expenses 900.00 

Out  Freight  8,500.00 

Plant  and  Equipment 40,000.00 

Purchases   100,000.00 

Rent  2,500.00 

Repair  Parts 1,100.00 

Return  Sales  1,000.00 

Salaries— Office  and  Officers 10,000.00 

Salaries — Salesmen    6,000.00 

Salaries — Shipping  Department  1,500.00 

Salary — Superintendent    2,000.00 

Sales  200,300.00 

Salesmen's  Expenses  2,100.00 

Sales  of  Waste  1,200.00 

Surplus   37,600.00 

Taxes  400.00 

Unexpired  Insurance  800.00 

Wages  in  Factory -. 15,000.00 

$368,100.00    $368,100.00 

The  inventory  at  December  31,  1915,  amounted  to  $45,000.00. 

The  company's  officials  also  have  asked  you  to  give  them 
your  opinion  of  the  proper  percentage  to  labor  which  they  should 
use  to  cover  overhead  in  figuring  costs. 


PRACTICAL   PROBLEMS,  GRADED,  SERIES  A 


Code  :    Discipline 

J.  C.  Thompson  conducts  a  general  real  estate  business  but 
specializes  in  opening  up  new  subdivisions.  He  agreed  with  Mr. 
M.  C.  Roberts,  that,  if  Roberts  would  furnish  the  capital  necessary 
to  buy  and  develop  the  Happy  Home  subdivision,  he,  Thompson, 
would  undertake  to  sell  it  for  their  joint  account.  Thompson 
was  to  receive  no  salary  for  selling  the  property  and  keeping  the 
books,  but  all  other  selling  expenses  were  to  be  charged  as 
expense.  No  allowance  is  to  be  made  for  interest  on  partners' 
balances,  but  all  other  expenses  are  to  be  charged  and  the  profits 
divided  equally. 

On  Feb.  1,  191G,  they  purchased  the  20  acres  comprising  the 

subdivision,  at  $3,000.00  per  acre,  paid  one-half  in  cash  from 

Roberts'  funds,  and  gave  a  6%  mortgage  for  the  balance.   By  the 
terms  of  the  mortgage,  any  part  of  the  property  could  be  released 

from  the  mortgage  at  any  time  by  paying  the  pro-rata  amount. 

In  February  and  March  the  property  was  improved  by  grad- 
ing, etc.,  at  a  cost  of  $10,000.00,  which  also  was  paid  from  funds 
supplied  by  Roberts. 

The  property  was  subdivided  into  160  lots  of  equal  size,  80  of 
which  were  listed  to  sell  at  $900.00  and  the  balance  at  $600.00. 

Forty-five  of  the  $900.00  lots  were  sold  in  May  and  twenty- 
three  in  June.  Twelve  were  still  unsold  at  June  30.  Twenty-nine 
of  the  $600.00  lots  were  sold  in  May  and  thirty-five  in  June,  leav- 
ing a  balance  of  sixteen  still  unsold  at  June  30.  All  of  the  lots 
were  sold  for  one  half  cash,  and  the  mortgages  for  the  balance 
were  immediately  sold  to  banks  at  par  without  endorsement  oi 
guarantee.  In  each  case  the  lots  were  released  from  the  purchase 
money  mortgage  by  payment  of  the  pro  rata  amount.  The  releases 
were  obtained  and  the  payments  made  on  the  last  of  the  month  in 
which  the  sale  was  made. 

The  expenses  of  advertising  and  selling,  amounting  to  $11,- 
000.00  were  paid  by  Thompson  from  the  proceeds  of  the  sales 
which  he  had  deposited  in  his  own  account  when  they  were  re- 
ceived.   He  also  made  the  payments  on  the  mortgage. 

Prepare  a  statement  showing  the  respective  interests  of  the 
two  partners,  and  also  a  statement  showing  the  profits  to  June 
30,  1916. 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  A 

Code  :   Discolor 

A  is  the  owner  and  operator  of  a  stone  quarry  which,  owing 
to  weather  conditions,  cannot  be  operated  between  December  1 
and  February  28.  **B"  caused  damage  to  the  quarry  which  de- 
layed the  commencement  of  operations  until  April  15th,  from 
which  date  the  quarry  was  worked  until  November  30  and  pro- 
duced 71,000  cubic  yards  at  a  quarry  cost  of  29c  per  cubic  yard. 
The  product  was  all  sold  at  77c  per  cubic  yard.  Overhead  ex- 
pense for  the  year  $10,000.  "B"  repaired  the  quarry  at  his  own 
expense.  You  are  required  by  the  lawyer  for  *'A"  to  indicate  the 
measure  of  consequential  damage  as  a  basis  for  action.  In  your 
answer  illustrate  your  method. 


Code  :    Discount 

The  following  is  a  trial  balance  of  the  general  ledger  of  a 
partnership  in  which  the  profits  are  shared  equally  at  the  end 
of  the  first  year  of  its  existence : 

Building  and   equipment $  6,000.00        $ 

Merchandise  and  materials 7,000.00 

Accounts  receivable  4,000.00 

Profit  and  loss  account 5,700.00 

John  Smith,  drawing  account 2,500.00 

Arthur  Morris,  drawing  account 2.000.0U 

George  Jones,  drawing  account 1.300.00 

John  Smith,  capital  account 10,000.00 

George  Jones,  capital  account 8,500.00 

Arthur  Morris,  capital  account 6.500.00 

Accounts  payable  3.500.00 

The  firm  decided  to  sell  the  business  and  to  dissolve  the 
partnership,  and  procured  a  purchaser  who  offered  the  sum  of 
$5,000.00  for  the  business  including  goodwill,  etc. 

State  how  the  proceeds  of  the  sale  should  be  apportioned 
among  the  partners,  showing  the  amount  each  would  receive. 


PRACTICAL   PROBLEMS,  GRADED,  SERIES  A 


Code  :    Discourse 

The  following  is  the  condition  of  affairs  of  the  "X"  "Y"  "Z" 
Company  on  December  31,  1912,  when  a  receivership  is  applied 
for: 

TRIAL  BALANCE  OF  X  Y  Z  COMPANY 

Dr.  Cr 

Goodwill  $  25,000.00       $ 

Real  estate  at  cost 10,000.00 

Building  and  plant 37,500.00 

Machinery   and   equipment 32,500.00 

Inventories  material  and  supplies v 17,500.00 

Finished  and  partly  finished  stock 36,000.00 

Accounts  receivable — 

Good  60,000.00 

Doubtful   25,000.00 

Bad  15,000.00 

Notes  receivable 10,000.00 

Investments    5,000.00 

Cash  5,000.00 

Experimental  and  development  expenses 22,000.00 

Prepaid  insurance  premiums 3,000.00 

Notes   payable 100,000.00 

Mortgage  payable,  secured  by  real  estate 7,500.00 

Accounts  payable 61 ,000.00 

Rentals    due 5,000.00 

Pay  rolls  accrued 10,000.00 

Reserve  fund  15.000.00 

Surplus •  30,000.00 

15.000  shares  of  $10.00  each,  $5.00  paid  up 75,000.00 

$303,500.00       $303,500.00 

The  real  estate  has  increased  in  value  and  is  said  to  be  worth 
$20,000.00,  while  it  is  estimated  that  the  buildings  and  plant  are 
fully  worth  $25,000.00,  the  machinery  and  equipment,  being  of  a 
special  character  and  unsuitable  for  any  other  business,  are  worth 
no  more  than  scrap  value,  viz.,  $2,500.00.  The  materials  and 
supplies  are  good  and  fully  worth  the  price  at  which  they  are 
carried  on  the  books,  but  of  this  stock,  material  of  a  value  of 
$10,000.00  is  pledged  as  collateral  on  warehouse  receipts  against 
accounts  payable  on  open  account.  The  finished  and  partly  fin- 
ished stock,  if  put  into  saleable  condition  will  bring  $30,000.00,  but 
it  is  estimated  that  it  will  cost  $5,000.00  to  accomplish  this.  Of 
the  doubtful  accounts,  50^  is  all  that  is  cons'idered  collectible, 
while  the  notes  are  good  and  investment  are  of  no  value.  Of  the 
notes  payable,  $50,000.00  are  fully  secured  by  accounts  receivable 
pledged  thereagainst  while  all  other  accounts  payable  except  those 
partially  covered  by  raw  material  are  unsecured  and  the  rentals 
due  and  pay  rolls  accrued  are  considered  as  preferential  claims. 
The  unpaid  subscriptions  on  the  capital  stock  are  considered  to 
be  worth  75%  of  the  face  value. 

Customers'  notes  to  the  extent  of  $25,000.00  have  been  dis- 
counted at  the  banks  on  the  company's  endorsement  on  which  it 
is  estimated  $5,000.00  will  eventually  Drove  to  be  uncollectible. 

Draw  up  a  Statement  of  Affairs  for  submission  to  the  credi- 
tors with  relative  Deficiency  Account,  showing  separately  the 
position  of  the  unsecured  creditors  and  of  the  stockholders,  re- 
spectively. 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  A 


Code:    Discover 

(a)  The  following  figures  are  for  three  departments  of  a  store 
in  the  central  west.  You  are  to  prepare  a  table  such  as  you 
would  present  to  the  proprietor  showing  for  each  department : 

1.  Cost  of  Sales  3.    Gross  Profit 

2.  Percentage  of  Cost  to  Sales         4.    Percentage  of  Gross  Profit 

Inventory  first  of  month — January  1,  1917 
Dept.  Cost  Price    Retail  Price 

A $  12,045.87      $  20,260.78 

B  2,264.00  3,911.62 

C  4,916.45  7,505.13 

Purchases  for  January 

Returned  Purchases 
Dept.         Cost  Retail  on  Cost        on  Retail  Cost  Retail 

A        $260.25         $437.11         $  1015  $  20.00         $  32.50 

B  259.24  419.74  $  25.40 

C  303.72  458.26  .'.....  27.25  

Sales  for  January 

Mark  down 
Dept.  Sales         on  Retail 

A   $  1,332.94  $0.99 

B    : 280.89  2.49 

C  „...      909.09  3.20 

Depreciation  of  2%  is  figured  on  the  cost  of  all  purchases. 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  A 


Code  :   Dock 


"X"  and  "Y"  purchase  an  invoice  of  coffee  for  $12,000.  "X" 
contributes  $7,500  and  "Y"  $4,500.  They  sell  "Z"  a  one  third 
interest  in  the  venture  for  $6,000.  How  much  of  the  $6,000  should 
"X"  and  "Y"  receive,  respectively,  in  order  to  make  "X,"  "Y" 
and  "Z"  equally  interested? 


Code  :    Docket 

"A"  and  "B"  carried  on  business  in  partnership  and  divided 
profits  and  losses  in  proportion  to  their  capital,  three-fifths  and 
two-fifths,  respectively.  On  January  1,  1915,  "A's"  capital  was 
$52,500.00  and  "B's"  $35,000.00,  as  shown  by  a  balance  sheet  of 
that  date.  They  agreed  to  admit  "C"  as  a  partner  from  the  same 
date  on  the  following  terms : 

(1)  Assets  and  liabilities  and  capital  to  be  taken  as  shown  in 
in  the  balance  sheet; 

(2)  $12,500.00  to  be  added  to  the  assets  for  goodwill; 

(3)  The   amount   of  goodwill  to   be   added  to   **A's"   and 
"B's"  capital  in  the  proportion   in   which  they   divide 

profits ; 

(4)  "C"  to  pay  to  the  partnership  such  a  sum  as  will  give 
him  a  one-fifth  share  in  the  business. 

(a)  State  what  amount  of  capital  ''C"  has  to  bring  in. 

(b)  Set  out  the  capital  accounts  of  each  partner  in  the  new 

partnership,  and 

(c)  State  in  what  proportions  the  profits  will  be  divided  in 
the  future,  ''A"  and  ''B,"  as  between  themselves,  sharing  in  the 
same  proportions  as  before. 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  A 

Code:    Dockyard 

"A,"  having  a  capital  of  $10,000,  took  "B"  into  partnership 
on  condition  of  his  bringing  in  $5,000.  In  ascertaining  profits 
each  year,  "A"  was  to  have  $3,000  salary,  and  "B"  $1,500,  and 
5%  interest  upon  capital  was  to  be  allowed  to  each  partner,  but 
no  interest  charge  was  to  be  made  on  withdrawals.  The  profits 
thereafter  were  to  be  divided: 

Up  to  $9,000 :    Two-thirds  to  "A,"  and 

One-third  to  "B." 

Any  excess  equally. 

No  limitation  as  to  withdrawals  in  anticipation  of  profits  was 
shown  in  the  deed  of  partnership,  and  at  the  end  of  the  first  year 
"A"  had  drawn  $3,000  and  "B"  $750  in  excess  of  their  salaries. 
The  profit  for  the  year,  before  making  the  above  charges,  amount- 
ed to  $17,500 

Complete  the  profit  and  loss  account,  and  show  the  partners* 
accounts  as  they  should  appear. 


Code  :    Doctor 

On  December  31,  1912  three  partners  had  the  following 

amounts  at  the  credit  of  their  Capital  Accounts: 

X    $25,000.00 

Y    15,000.00 

Z     10,000.00 

On  January  1,  1912  they  had  to  the  credit  of  their  Draw- 
ing Accounts: 

X    I   3,750.00 

Y     2,500.00 

Z     2,000.00 

Profits  are  to  be  divided  in  the  same  proportion  as  the 

capital  up  to  $10,000.00;   above  that  amount  X  gets  25%,  Y, 

35%  and  Z,  40%. 

X  drew  during  1912 |  2,500.00 

Y  "  "  "     2,000.00 

Z       ••  "  "     1,500.00 

The  profit  for  the  year  1912  amounted  to  $15,000.00,  be- 
fore charging  interest  on  capital  (to  which  all  are  entitled) 
at  4%. 

Give  the  drawing  account  of  each  partner  on  December 
31,  1912;  interest  on  drawings  to  be  ignored. 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  A 


Code  :    Doctrine 

Smith,  Bro^vn  and  Jones  agree  to  join  in  partnership  for  the 
purpose  of  working  a  patent.    The  patent  is  the  property  of  Jones. 

Smith  puts  into  the  business  in  cash  $10,000.00  and  Brown 
$15,000.00.  Jones  has  no  cash  capital,  but  his  patent  and  machin- 
ery are  taken  in  as  equivalent  of  $7,500.00  and  $2,500.00,  respec- 
tively, and  are  credited  to. his  capital  account  accordingly.  The 
life  of  the  machinery  is  estimated  at  ten  years,  and  the  patent 
has  fifteen  years  to  run.  Half  of  the  annual  depreciation  on  the 
patent  is  to  be  charged  against  Jones'  drawing  account.  Jones 
is  to  draw  $100.00  per  month  as  manager  of  the  business,  and  is 
to  have  one-third  of  the  net  profits  (subject  to  depreciation  as 
above),  the  remainder  of  the  net  profits  is  to  go  two-fifths  to 
Smith  and  three-fifths  to  Brown. 

The  profits  (before  charging  management  salary  and  deprecir 
ation  on  machinery  and  patents),  and  the  drawings,  are  as  fol- 
lov/s : 

1906.  1907.  1908. 

Profits  $7,500.00  $10,000.00  $20,000.00 

Drawings  by  Smith  1,000.00  750.00  1,000.00 

Drawings   by   Brown   1,500.00  1,000.00  1,250.00 

Drawings  by  Jones  (in  excess  of  salary 

and  before  charging  depreciation)      500.00  400.00  450.00 

You  are  required  to: 

(a)  Prepare  final  profit  for  each  year  showing  distribution 
of  net  profits  to  the  partners. 

(b)  Prepare  Capital  Accounts  of  the  partners  for  each  year. 

(c)  Prepare  Patent  and  Machinery  Accounts  for  each  year. 
.   Note. — In  answering  this  question  it  is  not  necessary  to 

show  journal  entries.     Interest  on  capital  is  not  to  be  considered. 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  A 


Code:    Document 

H.  Pratt,  F.  Jones  and  J.  Todd  entered  into  partnership  on 
July  1,  1914.  Pratt  brought  in  as  capital  $15,000.00 ;  Jones,  $10,- 
000.00,  and  Todd,  $5,000.00.  They  were  to  share  profits  in  the 
proportions  of  three-sixths,  two-sixths  and  one-sixth,  but  as  Jones 
and  Todd  were  the  working  partners  they  were  to  be  credited  at 
the  close  of  each  current  year,  by  way  of  salary,  with  the  respec- 
tive sums  of  $1,250.00  and  $750.00.  Pratt  was  to  be  allowed  to 
draw  each  year  as  against  profits  $2,500.00,  Jones  $1,650.00  and 
Todd  $1,250.00,  but  interest  at  6%  was  to  be  charged  on  such 
drawings.  The  partnership  agreement  also  provided  that  Jones 
and  Todd  should  have  the  right  to  bring  in  extra  capital  not 
exceeding  $8,000.00  each,  and  that  upon  such  capital  they  were 
to  be  credited  with  6%  interest.  On  closing  the  books  on  June 
30,  1915,  it  was  found  that  the  partners  had  drawn : 


Pratt 

Sept.  1.... $  500.00 

Nov.  1 750.00 

Dec.   1 1,000.00 


Jones 

Aug.  1 $  400.00 

Sept.  1 350.00 

Oct.    1 500.00 

Dec.    1 425.00 


Todd 

Aug.  1 $  300.00 

Sept.  1 250.00 

Nov.  1 400.00 

Dec.    1 100.00 


On  October  1,  Jones  brought  into  the  business  as  additional 
capital  the  sum  of  $1,250.00  and  Todd  $2,000.00.  On  closing 
the  books  at  June  30,  1915,  and  before  the  salary  or  interest  of 
partners  on  investments  and  loans  had  been  dealt  with,  the  balance 
to  the  credit  of  Profit  and  Loss  stood  at  the  sum  of  $11,000.00. 
Make  the  closing  entries  and  prepare  Capital  and  Drawing  Ac- 
counts showing  the  exact  position  of  the  partners  on  July  1,  1915. 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  A 


Code  :    Dodger 

J.  Smith's  Balance  Sheet  showed  the  following  Assets  and 
Liabilities : 

Land  and  Building  $750,000.00 

Merchandise    500,000.00 

Work  in  Progress 213,000.00 

Sundry  Debtors  275,000.00 

Patent  Rights  40,000.00 

Cash  at  Bank 25,000.00 

Sundry  Creditors  250,000.00 

Sundry  Bills  Payable 30,000.00     * 

A  corporation  (J.  Smith,  Sons  &  Co.)  was  formed  to  pur- 
chase the  business  for  the  sum  of  $1,750,000.00,  payable  $500,- 
000.00  in  common  stock,  $500,000.00  in  preferred  stock,  $500,- 
000.00  in  41/2%  debentures,  and  the  balance  in  cash,  the  com- 
pany agreeing  to  take  over  the  assets  of  J.  Smith  (with  the  excep- 
tion of  the  bank  balance)  and  to  assume  the  liabilities  to  creditors. 

The  capital  stock  of  the  company  was  $2,000,000.00,  divided 
into  250,000  common  and  150,000  preferred  shares  of  $5.00  each. 

50,000  shares  of  common  stock  and  the  balance  of  the  pre- 
ferred stock  were  offered  for  sale  to  the  public,  payable  25%  on 
application,  25%  on  allotment  and  50%  one  month  after  allot- 
ment. These  shares  were  all  sold  and  were  allotted  by  the  com- 
pany on  March  1,  1910. 

By  June  30,  1910,  all  moneys  due  thereon  had  been  received 
by  the  company  except  the  amounts  due  on  allotment  and  call 
accounts  in  respect  of  200  common  and  100  preferred  shares,  and 
the  directors  had  paid  the  cash  indebtedness  to  the  vendor  and  the 
organization  expenses  of  $25,000.00  and  had  declared  the  shares 
forfeited  upon  which  allotment  and  calls  were  in  arrears* 

Give  the  entries  which  should  appear  to  record  these  trans- 
actions in  the  company's  journal,  cash  book  and  ledger.  Give  also 
the  company's  balance  sheet  after  the  opening  of  the  books. 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  A 


Code  :  Dog  Ear 

"P,"  "Q"  and  "R"  are  partners,  shar- 
ing in  the  profits  in  the  proportion  of  5, 
3  and  2.  Their  balance  sheet  on  January 
1st,  1913,  stood  thus: 

LIABILITIES 

"P,"  Capital £3,500 

"Q"        do      2,100 

"R"        do      800 

Bank  1,300 

Creditors  1,820 

£9,520 

ASSETS 

Debtors £2,800 

Stock    6,600 

Cash  120 

£9,520 

Owing  to  the  rumors  of  the  firm's  in- 
stability, the  creditors  were  pressing  for 
immediate  payment.  As  the  stock  and 
debts  could  not  be  realized  at  short  notice, 
"P"  agreed  to  bring  into  the  firm  3,000 


£1  shares  in  Haberdashers,  Limited,  at 
an  agreed  value  of  £2750.  The  shares 
were  sold  by  the  firm  for  £2650,  the  ex- 
pense of  £20  being  paid  by  the  firm. 
There  was  no  stipulation  in  the  partner- 
ship deed  as  to  the  respective  shares  of 
the  partners  in  the  capital.  The  firm  paid 
off  the  bank  overdraft  and  reduced  the 
creditors  by  £1300,  but,  finding  that  they 
could  not  continue  business,  determined 
to  dissolve.  Owing  to  the  stock  and  debts 
being  both  very  old,  they  only  realized 
£2600  and  £1600,  respectively,  and  the 
cost  of  realization"  was  £200. 

Discuss  the  question  whether  "P's'* 
new  contribution  is  to  be  treated  as  capi- 
tal or  loan.  Close  the  accounts  and  make 
the  final  adjustment  between  "P,"  "Q" 
and  "R,"  showing  the  difference  caused 
by  regarding  "P's"  contribution  as  capi- 
tal or  as  loan. 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  A 

Code:   Dome 

On  the  date  of  a  partnership  settlement,  two  contracts  are  in 
hand  and  uncompleted ;  one  for  $1,200,  estimated  to  cost  $900,  is 
three-quarters  finished  and  is^  already  charged  to  customer  at  $1,200 
as  of  date  of  contract;  the  other  for  $2,000,  estimated  to  cost 
$1,500,  is  half  finished,  and  no  entry  has  been  made  thereof. 
Suggest  entries  necessary  to  adjust  these  accounts  so  that  antici- 
pation of  profits  shall  not  occur. 


Code:     Domestic 

A.  J.  Andrews  has  conducted  a  retail  business  for  three  years. 
His  profits  have  been  $7,000.00  for  1913,  $8,000.00  for  1914,  and 
$10,000.00  for  1915  before  charging  any  salary  for  his  own  serv- 
ices. In  order  to  obtain  the  capital  needed  to  purchase  the  new 
fixtures  necessary  in  a  new  store,  which  he  proposes  to  lease,  and 
also  to  increa«^e  his  stock  of  merchandise,  he  decides  to  incor- 
porate on  Dec.  31,  1915,  for  $50,000.00  and  to  sell  part  of  the 
capital  stock. 

C.  F".  Martin  agrees  to  purchase  $20,000.00  of  the  stock  at 
par  and  to  pay  for  it  imniediitely.  It  is  also  agreed  that  in  the 
new  corporation  Andrews  is  to  be  allowed  credit  for  goodwill 
equal  to  the  sum  of  his  profits  for  the  past  three  years  after  de- 
ducting an  innual  salary  of  $4,000.00. 

Draft  the  journal  entries  necessary  to  adapt  Andrews'  books 
for  use  as  the  books  of  the  corporation,  and  prepare  a  Balance 
Sheet  showing  the  conditions  as  completed. 

Andrews  presents  the  following  list  of  assets  and  liabilities, 

which  Martin  accepts  as  correct : 

Assets  :     Furniture  and   Fixtures — Book  value  $0,000.00 — 
Worth  $4,000.00. 

Merchandise— Market  value  $20,000  00— Cost  $18,000.00 
\ccounts  Receivable— Book  value  $0,500.00— Collectible 
$0,000.00. 
Cash— $400.00. 

Liabilities  :    Trade  Creditors— $8,900.00. 
Bank  Loans— $1,500.00. 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  A 

Code:    Dominical 

"A"  and  *'B"  entered  into  a  venture  in  flour,  agreeing  to 
share  profits  and  losses  equally. 

*'A"  supplied  3,000  sacks  of  flour  at  $5.00  per  sack,  which 
were  consigned  to  '*C"  on  June  25,  1914. 

"A"  drew  on  "B"  at  three  months'  date  from  July  1,  1914, 
for  the  price  of  the  flour,  "A"  discounting  the  note  at  his  own 
bank  and  paying  discount  charges,  $150.00. 

On  June  30  "A"  paid  in  connection  with  the  shipment  of  the 
flour : 

Insurance  Premium  $100.00 

Loading  Charges  150.00 

Freight  500.00 

*'C"  disposed  of  1,000  sacks  of  flour  at  $7.50  a  sack,  and  he 
granted  a  note  in  favor  of  *'A"  at  one  month's  date  from  August  1 
for  the  amount,  less  his  commission  of  5%. 

On  August  7,  1,000  sacks  of  flour  were  reshipped  by  "C"  to 
"B,"  who  sold  them  at  an  average  price  of  $10.30  per  sack,  and 
received  a  commission  of  5%  for  his  trouble. 

"B"  made  the  following  disbursements  on  August  20,  1914: 

Freight  and  Insurance $250.00 

Landing  Charges  150.00 

On  August  31,  1914,  "A"  sent  a  check  to  "B"  for  the  balance 
due  to  the  latter,  including  his  share  of  the  profit  on  the  trans- 
action. 

Disregard  interest  on  the  account.  Prepare  a  Profit  and 
Loss  Account  of  the  transactions  and  also  the  account  of  "B" 
in  "A's"  books. 


PRACTICAL   PROBLEMS,  GRADED,  SERIES  A 


Code:     Domicile 

The  balance  sheet  of  the  Greenleaf  Manufacturing  Co.  at 

December  31,  1913,  and  December  31,  1914,  may  be  summarized 
as  follows : 

Dec.  31, 1913  Dec.  31, 1914 

Goodwill  $  200,000.00  $  230,000.00 

Land  and  Buildings 450,000.00  750,000.00 

Machinery  „ 200,000.00  400,000.00 

Tools  40,000.00  80,000.00 

Unexpired  Insurance  3,000.00  4,000.00 

Inventories  400,000.00  375,000.00 

Accounts  Receivable  175,000.00  250,000.00 

Cash  25,000.00  20,000.00 

Investment  in  Stocks  and  Bonds 95,000.00 

$1,588,000.00  $2,109,000.00 

Capital  Stock $  800,000.00  $1,100,000.00 

Bonds  350,000.00  500,000.00 

Bank  and  Other  Loans 70,000.00  80,000.00 

Accounts  Payable  145,000.00  125,000.00 

Accrued  Interest 7,000.00  11,000.00 

Accrued  Taxes 4,000.00  6,000.00 

Surplus   212,000.00  287,000.00 

$1,588,000.00  $2,109,000.00 


During  the  year  a  dividend  of  4%  was  declared  and  paid  on 
the  stock  outstanding  at  the  beginning  of  the  year.  $7,000.00  was 
provided  for  the  depreciation  of  the  buildings,  $16,000.00  for  ma- 
chinery, and  $4,000.00  for  tools.  The  bonds  were  sold  for  par. 
The  stock  was  sold  at  90  and  the  difference  was  charged  to 
goodwill  account. 

Tn  the  light  of  the  above  facts  interpret  the  changes  that 
have  taken  place  in  the  financial  position  of  the  company  between 
the  two  dates  and,  so  far  as  possible,  indicate  how  they  were 
effected. 


PRACTICAL   PROBLEMS,  GRADED,  SERIES  A 


CODi::      DOMJNANT 

The  following  are  the  assets  and  liabilities  of  Jones  &  Jones 
at  December  31,  1914: 

ASSETS  LIABILITIES 

Accounts   Receivable $30,000.00  1914: 

Mdse.  on  Hand 17,500.00  Accounts 

Real  Estate  and  Bldgs 10,000.00  Payable                          $20,000.00 

Plant  and  Machinery 7,500.00  Capital  at  Jan.  1, 

Cash   10,000.00  John  Jones..$40,000.00 

Invested  in  Union  Pacific  David  Jones  25,000.00    65,000.00 

Bonds  25,000.00 

It  is  explained  to  yon  that  David  Jones  is  retiring  from  the 
firm  at  December  31,  1914,  and  the  following  additional  informa- 
tion is  given  to  enable  you  to  adjust  the  partnership  accounts  and 
carry  through  the  settlement : 

1.  The  books  have  been  kept  by  single  entry, 

2.  Profits  and  losses  are  shared  equally. 

3.  Partners  are  to  get  interest  for  the  year  at  6%*on  their 
credit  balances  on  January  1,  as  shown.  There  are  no 
drawings  apart  from  salary. 

4.  2V,%  is  to  be  taken  off  Accounts  Receivable,  3%  off  Mer- 
chandise on  hand,  and  $1,000.00  off  Plant  and  Machinery. 

5.  The  retiring  partner  receives  an  allowance  of  $5,000.00  in 
respect  of  goodwill. 

fi.    David  Jones'  interest  in  the  firm  will  be  paid  out  by  John 

Jones — who  continues  the  business — by  bills  at  six,  twelve, 

eighteen,  and  twenty-four  months  from  December  31,  with 

interest  at  6%  added. 

Prepare  a  P>alance  Sheet,  after  giving  effect  to  the  foregoing, 

showing  John  Jones'  position  after  the  settlement ;  also  make  up 

an  account  to  be  submitted  to  the  retiring  partner. 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  A 


Code:     Dominate 

On  June  30,  1913,  "X"  and  ''Y",  partners,  operating  a  manu- 
fatcnring  plant,  incorporated  under  the  laws  of  the  State  of  New 
York  as  the  "X"  and  '*Y"  Manufacturing  Company  with  an 
authorized  capital  of  $500,000.00.  The  corporation  purchased  all 
of  the  assets  and  assumed  all  of  the  liabilities  of  the  partnership 
as  set  forth  in  a  balance  sheet  dated  June  30,  1913,  giving  as 
consideration  its  entire  issue  of  capital  stock,  which  stock  was  all 
taken  by  "X"  and  "Y". 

BALANCE  SHEET,  JUNE  30,  1913 


ASSETS 

Plant  and  Machinery $175,000.00 

Material  on   Hand,  per 

Inventory  102,625.00 

Accounts   Receivable 113,750.00 

Notes  Receivable 7,500.00 

Cash   32,125.00 


LIABILITIES 

"X,"  Capital $240,000.00 

"Y,"  Capital 160,000.00 

Accounts  Payable 26,250.00 

Notes  Pavable 3,500.00 

Wages  Due  and  Unpaid      1,250.00 


Total   $431,000.00 


$431,000.00 


The  change  in  organization  was  not  reflected  on  the  books 
at  the  time  of  incorporation,  but  at  the  close  of  the  fir.st  fiscal 
year,  June  30,  1914,  of  the  corporation's  existence,  the  condition 
of  the  books  was  shown  by  the  following  trial  balance  : 

TRIAL  BALANCE,  JUNE  30,  1914 

"X"  Capital  $  $   240,000.00 

"Y"  Capital  160,000.00 

Plant  and  Machinery  187,500.00 

Material  per  Inventory,  June  30,  1913 102,625.00 

Sales  657,025.00 

Purchases  240,000.00 

Labor  172,500.00 

Office  Salaries  35,000.00 

Traveling  Expenses  12,000.00 

Interest   3,000.00 

Stationery  and  Printing  875.00 

Rent  and  Taxes  21,000.00 

Discount  and  Allowances  11,250.00 

Fuel  23,000.00 

Insurance  875.00 

Freight,  Inward  8,750.00 

Commission   31,875.00 

Advertising 2,500.00 

Notes  Receivable  30,575.00 

Notes  Payable  5,500.00 

Accounts  Receivable  180,575.00 

Accounts  Payable  39,250.00 

Cash  ...., 37,875.00 

$1,101,775.00       $1,101,775.00 

Depreciation  on  plant  and  machinery  5%  ;  unexpired  insur- 
ance $375 ;  bad  debts  $1,625 ;  inventory  of  material  on  hand,  June 
30.  1914,  $98,025. 

Make  such  entries  as  would  convert  the  partnership  books 
into  those  of  the  corporation,  and  prepare  a  statement  of  income 
and  profit  and  loss  for  the  year  July  1,  1913,  to  June  30,  1914, 
and  a  balance  sheet  as  of  June  30,  1914. 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  A 


Code:     Dominee 

"A."  **B."  has  on  December  31,  1914,  at  "C."  "D/s"  credit  xa 
his  accounts  payable  ledger  $1,800.00,  and  at  his  debit  in  the  Sales 
Ledger  $4,000.00,  both  due  for  payment  in  January,  less  2%%. 
On  January  25,  "A."  "B."  draws  on  "C."  "D."  at  three  months' 
date,  for  the  balance  due  to  him,  plus  interest  at  5%  per  annum. 
On  January  28,  "A."  "B."  discounts  the  note  with  his  bankers, 
paying  $25.00  for  discount. 

Make  entries  in  journal  entry  form  in  "A."  "B.'s"  books, 
recording  these  transactions,  keeping  in  view  that  there  are  ac- 
counts in  the  General  Ledger  controlling  the  Accounts  Payable 
and  Sales  Ledgers. 


PRACTICAL   PROBLEMS,  GRADED,  SERIES  A 


Code:     Domineer 

Alexander,  Brown,  and  Clark  entered  into  a  partnership  ar- 
rangement on  January  1,  1914,  their  business  being  the  operating 
of  a  dry  goods  store  in  Galesburg,  Illinois.  '  At  December  31, 
1914,  the  trial  balance  of  the  partnership,  before  making  any  ad- 
justments, was  as  follows: 

Dr.  Cr. 

Alexander,  Capital  Account  $  $     50,000.00 

Brown,  Capital  Account 30,000.00 

Clark,  Capital  Account  20,000.00 

Inventories  of  Merchandise,  January  1,  1914....  125,000.00 

Accounts  Receivable,  Customers  75,000,00 

Accounts  Receivable,  Employees 3,000.00 

Cash  in  Bank  „.  5,000.00 

Cash  on  Hand 1,000.00 

Notes  Payable  60,000.00 

Accounts  Payable - 15,000.00 

Sales  500,000.00 

Purchases,  including  Freight  323,000.00 

Salaries  and  Store  Expenses 125,000.00 

Bad  Debts  Written  off 2,500.00 

Interest  Paid  on  Notes  Payable 6,000.00 

Salary  to  Mr.  Alexander 2,500.00 

Salary  to  Mr.  Brown 4,000.00 

Salary  to  Mr.  Clark 3,000.00 

$  675,000.00       $  675,000.00 

Prepare  an  Income,  Profit,  and  Loss  Account  for  the  year 
1914  and  a  Balance  Sheet  as  at  December  31,  1914;  also  prepare 
an  account  for  each  partner,  showing  transactions  for  year,  after 
giving  eflFect  to  the  following  adjustments : 


PRACTICAL   PROBLEMS,  GRADED,  SERIES  A 


Code:    Doming 

Define  the  following  accounting  words  ^nd  terms 

1.  Balance  Sheet  Audit, 

2.  Appraisal, 

3.  Cost  System, 

4.  Fixed  Capital, 

5.  Capital  Expenditure, 

6.  Administration  Expenses, 

7.  Trade  Discount, 

8.  Raw  Material, 

9.  Local  Improvement  Assessment, 

10.  Purchase  Journal, 

11.  Preliminary  Expenses, 

12.  Work  in  Progress, 

13.  Petty  Cash  Fund, 

14.  Books  of  Original  Entry, 

15.  Inter-Company  Profits, 

16.  Depreciation  Reserve, 

17.  Internal  Check, 

18.  Joint  Account, 

19.  Partner's  Drawing  Account, 

20.  Amortization. 


Code:    Dominic 

"X"  receives  from  his  customer,  "Y,"  a  note  in  settlement 
of  his  account.  This  note  "X"  discounts  at  his  bank.  Draft 
entries. 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  A 


Code:     Domical 

An  electric  light  company  finds  that  its  feed  wires  to  a  cer- 
tain district  are  not  adequate  to  carry  the  load  and  installs  a  new 
wire  on  the  same  poles.  The  cost  of  the  new  line  was  $15,000.00 
for  material  and  $7,000.00  for  the  expense  of  installation. 

The  cost  of  that  part  of  the  old  line  which  was  removed  was 
$6,000.00  for  material  and  $3,000.00  for  installation.  The  salvage 
value  of  the  old  material  was  $5,000.00.  The  cost  of  that  part 
of  the  old  line  which  was  not  removed  was  $4,000.00  for  material 
and  $3,000.00  for  installation. 

The  line  had  been  in  service  for  8  years,  and  depreciation  had 
been  regularly  provided  at  3%  of  the  cost  value  of  the  transmis- 
sion system. 

Draft  the  journal  entries  necessary  to  record  properly  the 
facts. 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  A 


Code  :    Domino 

"X"  and  "Y"  enter  into  partnership,  "X .  '  capital  being 
$20,000,  and  "Y's"  $15,000.  Capital  is  to  bear  interest  at  10% 
per  annum ;  profits  are  to  be  divided  equally  between  thp  parties. 
The  profits  for  the  first  two  years  (after  charging  i:?terpst  on 
capital)  were: 

1st  year  $6,000 

2nd  year  7,500 

and  the  drawings  of  the  partners  (in  excess  of  salaries)  were: 

1st  year      2nd  year 

3  - $1,500         $1,750 

Y" 1,200  1,500 

At  the  end  of  the  2nd  year  "Z"  was  admitted  to  partnership, 
and  put  into  the  business  the  same  amount  of  capital  as  "Y"  had 
in  the  business  at  that  time,  and  on  the  same  conditions  as  to  inter- 
est and  division  of  profits.  The  profits  of  the  business  for  the 
third  year  after  charging  interest  on  capital  were  $12,000,  and 
the  partners'  drawings  in  excess  of  salary  were : 

;;x;' ^,,750 

Y"  1600 

"z" - — „ lisoo 

« 

Construct  the  capital  accounts  of  the  partners  for  each  of 
the  three  years,  showing  the  balance  of  each  at  the  end  of  the 
third  year. 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  A 


Code  :    Donate 

"A"  and  "B,"  who  had  hitherto  been  in  business  separately, 
decided  to  enter  into  partnership  on  July  1,  1905.  The  balance 
sheets  of  "A"  and  "B"  were  on  that  date  as  follows: 

"A."    LIABILITIES: 

Accounts  Payable  $1,000 

Capital  Account  5,000       $6,000 

ASSETS : 

Furniture    $   750 

Accounts  Receivable  (face  value) 2,500 

Merchandise    2,550 

Cash  200       $6,000 

"B."    LIABILITIES: 

Accounts  Payable  $1,500 

Capital  Account  3,000       $4,500 

ASSETS : 

Furniture   ^ $  600 

Accounts  Receivable  (face  value) 1,500 

Merchandise    2,000 

Cash  400       $4,500 

It  was  ^reed  that  "A"  and  "B"  should  take  over  their  re- 
spective accounts  receivable  at  $200  and  $150  less  than  the  face 
values  shown  in  the  balance  sheets,  these  amounts  to  be  charged 
against  their  capital  accounts  and  carried  on  the  partnership 
books  as  a  reserve  for  bad  and  doubtful  acci>unts.  Of  "B's" 
furniture,  only  $250  was  to  be  taken  over  by  the  partnership. 
With  the  above  exceptions,  the  assets  and  liabilities  of  the  parties 
were  to  be  taken  over  by  the  partnership  at  the  balance  sheet 
figures,  except  that  "B"  was  to  invest  in  the  partnership,  in  cash, 
a  sum  which,  after  making  the  adjustments  above  referred  to, 
would  make  his  capital  account  the  same  as  that  of  *'A." 

Draw  the  balance  sheet  of  the  "A"  and  "B"  partnership  on 
July  1,  1905,  giving  effect  to  the  foregoing  provisions. 


PRACTICAL   PROBLEMS,  GRADED,  SERIES  A 


Code:    Done 

**A"  &  "B"  purchased  the  assets  and  took  over  the  liabiHties 
of  a  business  for  which  they  paid  $40,000,  each  providing  $20,000. 
The  price  was  made  up  as  follows : 

Real  Estate  $17,500 

Plant  and  Machinery  10,250 

Stock  of  Merchandise 15,000 

Accounts  Receivable  11,920 

Total  Assets  $54,670 

LESS  :— 

Accounts  Payable  $13,250 

Allowance  for  discounts  and  bad  debts 1,420    $14,670 

Purchase  money  paid  in  cash $40,000 

"A"  &  "B"  agreed  to  admit  "C"  into  partnership,  on  the 
terms  that  they  first  add  to  the  price  paid,  $4,000  for  goodwill, 
and  that  "C"  bring  in  a  sum  in  cash  sufficient  to  make  him  an 
equal  partner.  ''C"  paid  the  necessary  sum  into  the  partnership  ac- 
count at  the  bank. 

Make  the  opening  entries  in  the  journal  of  the  new  firm,  re- 
cording the  above  transactions,  and  draw  up  a  balance  sheet  as 
at  the  commencement  of  "A,"  "B"  and  C's"  partnership,  assuming 
that  all  the  capital  had  been  brought  in  before  there  was  any 
change  in  the  assets  or  liabilities. 


Code  :    Donor 

Two  parties,  "A"  and  **B,"  have  been  in  business  for  the 
three  years  ending  December  31,  1904,  on  which  date  they  agree 
to  dissolve  partnership.  "A"  takes  over  the  business,  paying  "B" 
$7,500  for  his  share  of  the  goodwill.  "A"  has  drawn  out  each 
year  $2,000,  and  "B"  $3,000.  "A's"  capital  at  start  was  $10,000, 
and  "B's"  $12,500,  and  the  profits  of  each  year  have  been  $3,500, 
$4,200  and  $4,600  respectively.  There  was  no  deed  of  partner- 
ship, nor  any  arrangement  as  to  interest  on  capital.  Draft  ac- 
counts showing  "A's"  capital  on  taking  over  the  business,  and 
the  amount  "B"  will  receive  on  retiring. 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  A 


Code:    Doom 

A  partnership  was  formed  July  1,  1907,  to  act  as  factory 
selling  agents  with  capital  invested  by  Baker  $5,000,  Draper 
$7,000,  Fowler  $8,000,  profits  and  losses  to  be  shared  in  propor- 
tion to  original  capital  investments,  no  interest  to  enter  into  part- 
ners' accounts. 

On  December  31,  1909,  the  books,  which  had  been  badly 
kept,  showed  the  following  balances  which  were  not  disputed  by 
any  of  the  partners :  Baker  net  credit  $3,000,  Draper  net  debit 
$3,370,  Fowler  net  credit  $4,650;  cash  in  banks  and  on  hand 
$804.20 ;  expense  debit  $4,550 ;  interest  credit  $350 ;  accounts  re- 
ceivable factories  $2,240 ;  investment  account  $12,000. 

The  firm  holds  a  number  of  one  year  sales  contracts  under 
which  the  minimum  guaranteed  will  net  $15,000  in  commissions. 
The  factories  make  shipments  to  customers  direct  and  send 
monthly  statements  to  Baker,  Draper  and  Fowler  of  shipments 
and  commissions.  The  investment  account  represents  holdings  at 
par  of  75%  of  the  capital  stock  of  a  company  on  whose  books 
at  the  end  of  1909  appears  a  deficit  of  $2,700. 

Baker  and  Draper  have  agreed  to  sell  their  interest  in  the 
business  as  of  December  31,  1909,  including  the  firm  name,  to 
Fowler  for  200  cents  on  the  dollar,  taking  notes  covering  18 
months. 

Prepare  a  statement  showing  the  settlement  between  partners 
on  December  31,  1909,  and  a  balance  sheet  as  of  January  1,  1910, 
of  Baker,  Draper  and  Fowler. 


PRACTICAL   PROBLEMS,  GRADED,  SERIES  A 


Code :    Door 

Charles  Cabell,  William  West  and 
Henry  Hart  form  a  partnership  for  the 
purpose  of  engaging  in  the  manufacture 
of  plug  and  smoking  tobaccos.  Cabell 
invests  $75,000,  West  $50,000,  and  Hart 
$25,000.  Profits  or  losses  are  to  be 
shared  as  follows :  Cabell  1-2,  West  1-3, 
and  Hart  1-6.  Interest  is  not  to  be  al- 
lowed on  capital,  nor  charged  on  with- 
drawals, but  each  partner's  withdrawals 
during  any  one  year  are  not  to  exceed 
one-tenth  of  his  capital  in  the  business. 

At  the  end  of  their  first  fiscal  year  their 
ledger  shows  the  following  balances : 

Charles  Cabell,  Capital 
Account  $  $  75,000.00 

William  West,  do 50,000.00 

Henry  Hart,  do 25,000.00 

Charles  Cabell,  With- 
drawal Account  5,842.17 

William   West,  do 4,179.16 

Henry  Hart,  do 2,033.88 

Machinery  11,026.92 

Land  and  Buildings 25.000.00 

Furniture  and  Fixtures..       1,866.13 

Cash   8,730.45 

Accounts  Receivable  131,244.49 

Bills  Receivable 4,999.97 

Accounts  Payable 6,138.16 

Bills  Payable  118,060.62 

Sales— Plug  Tobacco 249,472.43  , 

do  —Smoking  Tobacco  61,882.25  ' 

do   —Stems   841.95 

Leaf  Tobacco  200,044.57 

Licorice  and  Flavoring....    21,918.66 

Boxes  8,572.10 

Labor   „ 25.182.47 


Stamps 48,476.24 

Power,  Light  and  Heat..  3,571.60 

Factory  Expense 7,380.55 

Hauling  In  1,451.30 

Salaries   12,443.71 

Office  Expense  4,228.87 

Insurance    1,682.90 

Interest  and   Discount....  9,164.47 

Postage    1,211.97 

Attorneys'  Fees  769.25 

Salesmen's  Salaries, 

Commissions,  etc 38,795.15 

Advertising  5,149.09 

Lost  Accounts  1,429.34 

$586,395.41  $586,395.41 

Ten  per  cent  is  to  be  charged  oflf  from 
Machinery  Account,  to  cover  deprecia- 
tion, and  a  reserve  equal  to  2  per  cent  of 
the  Accounts  and  Bills  Receivable  is  to 
be  created  to  cover  possible  undeveloped 
losses. 

The  unexpired  insurance  premiums 
amount  to  $331.11. 

The  inventories  are: 

Finished  Goods $38,189.42 

Goods  in  Process  „..„ 11,209.35 

Leaf  Tobacco 49,128.98 

Licorice  and  Flavoring 1,511.68 

Boxes 1,073.04 

Stems  _ 43.31 

Draft  journal  entries  for  closing  the 
books  (separating  Profit  and  Loss  Ac- 
counts into  Manufacturing,  Trading,  and 
Profit  and  Loss  Divisions)  and  prepare 
a  balance  sheet. 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  A 


Code:    Dormer 

"A"  and  "B"  carried  on  business  in  partnership  for  a  number 
of  years.  Their  original  capital  was  $4,500,  which  had  been 
contributed  as  to  two-thirds  by  "A"  and  one-third  by  "B."  The 
profits  and  losses  were  divided  in  the  same  proportions.  "A" 
died  March  31,  1907,  and  "C"  was  appointed  to  realize  and  dis- 
tribute the  assets.  The  last  balance  sheet  was  dated  September  30, 
1906.  The  assets  realized  $15,000.  There  was  owing  for  accounts 
payable  $6,000,  and  the  costs  and  expenses  in  connection  with  the 
winding  up  of  the  business  were  $500.  The  balances  on  part- 
ners' accounts  at  the  date  of  "A's"  death  were:  "A,"  capital 
account,  $3,000;  "A,"  current  account  (credit),  $3,750;  "B," 
capital  account,  $1,500;  "B,"  current  account   (credit),  $3,500. 

Continue  and  complete  the  partners'  ledger  accounts;  credit 
"A"  with  interest  at  5%  on  $250  for  6  months,  and  prepare  a 
final  statement  embodying  the  results  of  the  realization. 


PRACTICAL   PROBLEMS,  GRADED,  SERIES  A 


Code  :    Dorsal 

"The  firm  "C"  &  "D"  carry  on  business  as  dry  goods  mer- 
chants at  Seattle  and  Tacoma,  and  decide  to  dissolve  partnership 
on  Dec.  31,  1907.    At  that  date  their  balance  sheet  was  as  follows: 

ASSETS : 

Cash  $     100.00 

Merchandise — 

At  Seattle  $12,000.00 

At  Tacoma 7,250.00 

19,25000 

Accounts  Receivable  „ 17,000.00 

Furniture  and  Fixtures — 

At  Seattle $  1,700.00 

At  Tacoma 1,100.00 

2,800.00 

Goodwill  3,000.00 

$42,150.00 

LIABILITIES : 

Overdraft  $  1,050.00 

Accounts  Payable 11,100.00 

"Cs"  Capital  _ 20,000.00 

"D's"  Capital  10,000.00 

$42,150.00 

The  partners  divide  in  proportion  to  their  respective  capital 
investment,  and  agree  that  at  the  date  of  dissolution  "C"  shall 
take  over  the  merchandise  and  furniture  at  Seattle,  and  "D"  the 
merchandise  and  furniture  at  Tacoma,  at  the  values  shown  in  the 
above  balance  sheet.  The  accounts  receivable  realize  $16,000, 
and  all  the  liabilities  are  paid  less  $300  discount  on  accounts 
payable. 

The  realization  is  completed  by  June  30,  1908,  and  you  are 
required  to  continue  all  the  accounts  appearing  in  the  balance 
sheet  up  to  and  including  that  date,  and  to  show  the  final  closing 
of  the  accounts,  (including  those  of  the  partners). 


PRACTICAL    PROBLEMS,  GRADED,  SERIES  A 


Code  :    Dotage 

A.  is  a  manufacturer  of  carpets  and 
his  balance  sheet  at  a  certain  date  shows 
as  follows : 

ASSETS 

Cash  in  Bank  $     815.00 

Real  estate,  appraised  value.^ 20,000.00 

Machinery,  after  10%  depreciation 40,000.00 

Book  accounts,  receivable 7,227.50 

Inventory,  stock  finished 11,000.00 

"  stock  in  looms 850.00 

"  raw  material  and  supplies..       107.50 

$80,000.a) 
LIABILITIES 

Bills  payable $22,000.00 

Book  accounts  payable  28,000.00 

He  agrees  with  B.  to  sell  him  one- 
half  interest  in  the  business  for  the  sum 
of  Twenty  Thousand  Dollars,  to  be  con- 
tributed to  new  firm,  the  new  firm  to  take 
the  assets  of  A.,  with  the  exception  of  the 
real  estate,  and  assumes  all  the  liabilities, 
and  that  the  goodwill  of  the  business  of 
A.  should  be  rated  at  $20,000  in  the  new 
firm's  books.  It  was  discovered  shortly 
after  the  commencement  of  business  of 
the  new  firm  that  the  inventory  of  fin- 
ished stock  was  incorrect,  and  that  the 
value  should  have  been  stated  at  $8,500 
instead  of  $11,000  and  that  of  the  book 
accounts  receivable  only  $6,227.50  were 
collectible,  one  of  the  debtors,  owing 
$1,000,  having  failed  and  absconded, 
leaving  no  assets,  previous  to  the  forma- 


« 
tion   of   the   co-partnership,   which    fact 

was  known  to  A.,  and  his  bookkeeper 
had  been  instructed  to  charge  oflf  the  ac- 
count but  failed  to  do  so.  No  correction 
was  made  of  these  discrepancies.  The 
trial  balance  at  the  end  of  one  year's 
business  showed  as  follows : 

A,  Capital  account  $  25,000 

B,  Capital  account  25,000 

A.  Personal  account  $  3,100 

B,  Personal  account  3,100 

Merchandise   78,000 

Book  accounts  receivable 15,400 

Expense  1,500 

Machinery  40,000 

Manufacturing  expense  22,000 

Wages  44,000 

Rent  1,500 

Profit  and  loss  600 

Book  accounts  payable 45,200 

Cash  22,000 

Goodwill 20.000   

$173,200    $173,200 

The  inventory  at  close  of  year  footed 
up: 

Finished  stock $  28,000 

Stock  in  looms  1,500 

Raw  material  and  supplies 1,500     $31,000 

No  amount  had  been  charged  oflF  for 
depreciation  of  machinery,  which  should 
be  10%. 

Make  proper  entries  to  correct  books, 
and  formulate  balance  sheet  showing  the 
standing  of  the  firm,  and  give  reasons 
for  any  correction  that  may  be  made. 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  A 


Code  :     Dotation 

How  would  you  vouch  the  following  items  appearing  in  the 
books  of  a  company  you  are  auditing;  and  state  specifically  the 
papers  or  documents  you  would  call  for  in  support  of  the  dis- 
bursement : 

(1)  The  Rapid  Typewriter  Co. — 

Typewriters  purchased  in  exchange  for  old  ones....$  3,000.00 

(2)  Alex.  Greene — 

Real  Estate  acquired  for  plant  site 7,500.00 

(3)  Automatic  Sprinkler  Co. — 

Installment  paid  on  sprinkler  system 10,000.00 

(4)  John  Mace — 

Stumpage  purchased  625.00 

(5)  Safety  Trust  Co. — 

Par  Value  $3,000.00  Bonds  2,970.00 

(6)  Machinery  constructed   and   erected  by  the  com- 

pany's staff 10,500.00 

(7)  Thomas  Jones,  Salesman — 

Traveling  Expenses  for  week 73.20 

(8)  A.  B.  Co.— 

Note  payable  discounted  987.50 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  A 


Code  :     Dote 

John  Williams  is  a  building  contractor  who  enters  into  a 
contract  with  Frank  Brown  by  which  they  agree  that  they  will 
make  a  joint  bid  to  design  and  construct  a  proposed  office  build- 
ing. The  contract  provides  that  Brown  and  Williams  are  to 
share  equally  in  the  profits  or  losses  of  the  venture.  Brown  is 
to  supply  the  larger  part  of  the  working  capital  necessary  and 
is  to  be  allowed  interest  at  6%  on  the  excess  of  his  investment 
over  the  investment  by  Williams. 

They  are  successful  in  securing  the  contract  for  the  erection 
of  the  building,  but  owing  to  adverse  physical  conditions  the  cost 
considerably  exceeds  the  bid.  At  a  meeting  to  effect  a  settlement, 
they  each  present  statements  of  expenses  which  are  agreed  upon 
with  the  exception  of  certain  items  included  in  Williams'  bill, 
which  Brown  claims  are  excessive,  although  he  acknowledges  the 
accuracy  of  all  the  facts  involved. 

In  order  to  settle  the  matter  amicably  they  ask  your  opinion 
of  the  justice  of  the  following  charges  by  Williams: 

Concrete  Mixing  Machine— Cost,  $3,000.00.  Used  for  four 
months  on  this  job  and  used  on  the  average  10  months 
per  year. 

Interest  at  6%  is  $180.00  per  year,  4/lOths  year .$     72.00 

Depreciation  at  15%  is  $450.00  per  year,  4/lOth  year....     180.00 
Repairs,  average  cost  $100.00  per  year,  4/lOth  year 40.00 

Second  hand  lumber,  used  for  platforms,  etc.  Used  by 
Williams  on  a  previous  job  and  destroyed  during  con- 
struction of  this  building.  For  the  purpose  it  was  fully 
as  good  as  new  lumber  and  will  have  to  be  replaced  by 
new  lumber.    Cost  to  replace  1,500.00 

Proportion  of  Material  Yard  Expenses.  Determined  by  ap- 
plying to  the  total  yard  expenses  for  the  year,  the  ratio 
of  the  purchases  for  this  contract  to  the  total  purchases 
for  the  year  300.00 

Special  Shape  Steel  Beams. — Taken  from  Williams'  material 
yard.  Originally  bought  for  a  previous  contract  at  a  cost 
of  $1,500.00  but  were  never  used.  If  they  had  not  been 
used  on  this  contract  they  would  have  been  sold  as  junk 
for  about  $500.00.    Cost  to  buy  in  present  market 2,000.00 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  A 


Code  :     Doth 

John  Doe  and  Richard  Roe  started  in  business  in  1910  as 
a  partnership  and  although  the  business  was  incorporated  at 
December  31,  1914,  the  old  books  were  continued  and  no  entries 
were  made  to  record  the  change  to  the  corporate  form. 

The  assets  and  liabilities  of  the  firm  at  December  31,  1914, 
are  shown  on  the  books  as  follows: 

Land $  10,000.00           Notes  payable $  10,000.00 

Building 20,000.00           Accounts  Payable  15,000.00 

Machinery  and  Capital  Acounts— 

Equipment 15,000.00  John  Doe..$45,000.00 

Accounts  Receivable 25,000.00  Richard 

Notes  Receivable 5,000.00                  Roe  54,000.00       99,000.00 

Cash  4,000.00 

Merchandise  45,000.00 

$124,000.00  $124,000.00 


No  definite  agreement  has  been  reached  as  to  the  dispo- 
sition of  the  diflFerence  in  the  capital  accounts  of  the  partners 
and  you  are  required  to  state  the  reasons  in  favor  of  the  treat- 
ment you  recommend.  For  the  purposes  of  the  remainder  of  this 
problem  you  will  assume  that  the  treatment  you  have  recommend- 
ed has  been  adopted. 

Give  the  journal  entries  necessary  to  adapt  the  books  of  the 
partnership  to  the  use  of  the  corporation  based  on  the  above 
information.  Also  prepare  a  balance  sheet  after  the  entries  have 
been  posted. 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  A 


Code:    Dotterel 

The  Nitrite  Deposits  Company  is  incorporated  locally  to 
take  over  the  business  in  Chile  of  Messrs.  W.  E.  Greetham  and 
S.  O.  Else. 

The  assets  of  the  partnership  are  valued  at  $1,000,000.00 
exclusive  of  any  goodwill. 

The  company  is  incorporated  with  a  nominal  capital  of 
$2,000,000.00  in  shares  of  $100.00  each,  of  which  the  vendors 
receive  15,000  shares,  and  the  remainder  are  issued  to  the  public 
at  par. 

The  vendors  enter  into  an  agreement  by  which  they  hand 
back  2,000  shares  as  a  gift  to  the  company  after  the  issue  to  the 
public  has  been  effected.  The  board  decided  to  take  these  shares 
up  on  the  books  at  $50.00  each,  which  was  done.  During  the 
year,  however,  the  shares  were  sold,  and  realized  an  average  price 
of  $90.00  per  share,  and  it  is  now  proposed  to  credit  the  difference 
to  Profit  and  Loss  Account. 

(a)  State  your  views  as  to  this  treatment,  and  if  you  do 
not  consider  it  correct,  indicate  the  course  you  would  recommend 
should  be  followed,  and  state  also  if  your  answer  would  be  the 
same  in  the  event  the  company  had  been  capitalized  at  only 
$1,000,000.00  and  the  vendors'  and  other  shares  had  been  reduced 
proportionately. 

(b)  Draft  the  entries  necessary  to  record  the  above  trans- 
actions on  the  books  of  the  company. 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  A 


Code:    Double 

The  condensed  trial  balance  of  a  partnership  follows ; 

Partner  ''A/'  capital $  $  65.000 

Partner  "B,"  capital  25,000 

Merchandise    „ 50,000 

Accounts  Receivable  51000 

Partner  "A,"  loan  1 "."        '  20,000 

Fixtures,  etc _ 1 1,500 

Lash  Items  i  500 

Partner  "A,"  interest  Z"™Z^"I!""^Z".."  '  3  500 

Partner  "B,"  interest 2000 

Accounts   Payable  Z  la.'oOO 

Proht  and  Loss  14  500 

$128,500.      $128,500 

^  ■  ■  *  ■  -  IN 

The  partnership  agreement  provides  for  no  salaries  of  part 
ners.  Profits  and  losses  are  to  be  divided  equally  between  part 
ners.  The  facts  disclosed  by  the  profit  and  loss  account  lead  to  a 
dissolution.  It  is  agreed  that  assets  shall  be  applied  to  liquidation 
as  fast  as  realized.  They  become  applicable  in  the  following  order 
and  yield  the  valuations  named :  cash  items  and  fixtures,  100%  ; 
merchandise,  40%  ;  accounts  receivable,  80%.  Show  the  entries 
that  you  would  make  covering  the  liquidation  and  for  finally 
closing  the  books. 


Code  :    Doubled 

Suppose  that,  for  the  corresponding  figures  in  the  preceding 
question  the  following  were  substituted:  Partner  "A,"  capi- 
tal, $35,000;  Partner  "B,"  capital  $20,000;  Accounts  Pay- 
able, $48,000;  merchandise  yielding  25%  of  valuation,  and  ac- 
counts receivable,  40%.  All  other  items  are  the  same  as  before. 
Show  the  entries  covering  the  liquidation,  assuming  that  neither 
partner  personally  has  more  than  $5,000  of  property  beyond  his 
share  in  the  assets  of  the  business  and  that  this  amount  is  availa- 
ble, if  necessary,  toward  liquidating  the  debts  of  the  firm,  and 
that,  if  this  is  not  enough,  the  partners  are  by  bankruptcy  proceed- 
ings acquitted  of  further  liability. 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  A 

Code:    Doubt 

"X"  and  **Y"  were  co-partners,  sharing  equally  the  net 
profits  of  the  business :  "Y"  had  exclusive  charge  of  the  business 
and  of  the  accounts  of  the  firm,  with  duty  of  furnishing  to  "X" 
at  the  close  of  each  year  a  statement  of  the  condition  of  the  firm's 
accounts,  together  with  details  of  the  profit  and  loss  account  for 
the  year. 

According  to  the  statements  rendered  by  "Y"  for  the  years 
11)00,  1901,  1902,  the  following  conditions  of  account  appeared: 

On  Jan.  1,  1900,  ''X's"  capital  account  was  $135,000  and  the 
inventory  amounted  to  $175,000;  the  purchases  during  the  year 
were  $950,000  ;  the  sales  were  $1,175,000 ;  expenses  were  $110,000 
and  the  inventory  Dec.  31  amounted  to  $160,000. 

For  the  year  1901  the  inventory  Jan.  1  was  $160,000;  the 
purchases  were  $875,000 ;  the  sales  were  $1,180,000 ;  the  expenses 
were  $125,000  and  the  inventory  Dec.  31  amounted  to  $150,000. 

For  the  year  1902  the  inventory  Jan.  1  was  $150,000,  the 
purchases  were  $910,000;  the  sales  were  $1,210,000;  the  expenses 
were  $130,000,  and  the  inventory  Dec.  31  amounted  to  $110,000. 

"X"  had  an  examination  made  of  the  books  and  the  follow- 
ing irregularities  in  the  accounts  were  thereby  discovered: 

1.  There  were  included  in  the  sales  for  1902  goods  at  an 
estimated  cost  of  $20,000,  which  formed  no  part  of  the  inven- 
tories or  purchases. 

2.  Goods  were  omitted  from  the  inventories  of  several  years 
as  follows:  Jan.  1,  1901,  valued  at  $30,000;  Jan.  1,  1902,  valued 
at  $50,000;  Jan.  1,  1903,  valued  at  $50,000. 

State  "X's"  capital  account  for  the  several  years  as  it  would 
appear  from  the  statements  rendered  by  "Y,"  and  determine  and 
state  what  modification  of  it  will  result  from  a  correction  of  the 
above  irregularities,  giving  the  correct  amount  of  his  capital  for 
each  year. 

Give  details  of  process  by  which  you  reach  your  results. 


t^ 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  A 


Code:    Doubtful 

Black  &  White  were  partners  upon  the  following  terms : 

1.  They  were  to  receive  5%  interest  upon  their  respective 
partnership  capital; 

2.  They  were  to  receive  as  partnership  salaries  as  follows: 
Black,  $250.00  per  month ;  White,  $100.00  per  month ; 
and  were  to  draw  no  further  sums  pending  the  ascertain- 
ment of  profits ; 

3.  Depreciation  at  10%  per  annum  to  be. written  off  Plant 
and  Machinery  as  standing  on  the  books  at  the  close  of 
the  year; 

4.  Provision  at  5%  (for  doubtful  accounts)  to  be  reserved 
for  all  accounts  receivable,  not  including,  however,  bills 
receivable ; 

The  net  profit  or  loss  to  be  shared  as  follows:     Black, 
two-thirds ;  White,  one-third. 
On  November  30,  1915,  the  following  was  the  trial  balance 
of  the  firm's  books,  which  were  kept  by  double  entry : 

DR.  CR. 

Partners'  Salary  Account ". ....$    3,850.00    $ 

Purchases   127.310.00 

Investments  (at  cost) 6,150.00 

Wages   19,205.00 

John  Jones  &  Co 17,130.00 

Jas.  Smith  &  Son  35,695.00 

Wm.  Owen  18,120.00 

Legal  Expenses 70.00 

Cash  50.00 

Bank    6,025.00 

Real  Estate 103,205.00 

Machinery  and  Plant 27,200.00 

Bills  Receivable 2,570.00 

Manager's  and  Clerks*  Salaries 4,725.00 

Office  Expense „ 540.00 

Discount   1,070.00 

Inventory  January  1,  1915 19,210.00 

Rent  (11  months) 3,300.00 

Albert  Black  (Capital  Account  on  January  1,  1915)  21,000.00 
Benjamin  White   (Capital  Account  on  January   1, 

1915)    7,500.00 

Dividends  Received  on  Investments „ 150.00 

Bills  Payable  :. 19,075.00 

Sales  242,805.00 

Roberts  Brothers  41,215.00 

Robinson  &  Co 28,840.00 

J.  Green  &  Son  34,840.00 

$395,425.00    $395,425.00 


/ 


(Continued  on  next  page.) 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  A 


Code:    Doubtful— Continued 

Amend  the  foregoing  balances  so  far  as  may  be  necessary 
by  posting  the  following  transactions  for  the  month  of  December, 
1915: 

Dec.  2.     Purchased  from  Roberts  Bros,  on  credit $39,205.00 

"     8.     Paid  taxes  705.00 

*•     9.     Paid  Robinson  &  Co.  (after  deducting  discount  of  $60.00)  1,200.00 

•'    10.     Paid  bill  payable  to  H.  Brown  &  Co 500.00 

"    11.     Received  from  J.  Smith  &  Co.  (less  discount  of  $210.00)  4,740.00 

"    12.     Sold  Wm.  Owen   (on  credit) 5,000.00 

**    15.     Purchased  from  J,  Green  &  Son  (on  credit) 17,105.00 

**    16.     Bought   gas   engine   from   Al-Ki   Gas   Engine   Co.    (on 

credit)   1,750.00 

"    17.     Paid   wages 2,210.00 

••   21.     Paid  taxes  ; 105.00 

**    24.     Paid  premium  on  fire  insurance  policy  for  year  ending 

December  24,  1916  525.00 

"    30.     Received  for  sale  of  investments 6,000.00 

"   31.     Paid  office  salaries  1,800.00 

Paid  office  expenses  100.00 

Paid  wages  „ 2,200.00 

Sold  James  Smith  &  Co.  (on  credit) 5,245.00 

All  of  the  above  payments  were  made  by  check  and  all 
amounts  received  were  paid  into  the  bank  upon  receipt.  The 
stock  on  hand  on  December  31,  1915,  was  agreed  by  the  partners 
as  worth  $17,000.00.  The  outstanding  rent  due  to  Benjamin  & 
r.cwis  for  December,  $300.00,  and  the  partners'  drawings  for  the 
same  month  must  be  provided  for.  After  making  ail  adjust- 
ments provided  for  in  the  clauses  of  the  partnership  agreement, 
balance  the  books  as  at  December  31,  1915,  and  prepare  trial 
balance.  Make  up  a  profit  and  loss  account  divided  into  the 
proper  trading  and  general  sections.  Close  this  by  dividing  the 
net  profits  between  the  partners  in  the  proper  proportions  and 
prei)are  a  balance  sheet. 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  A 


Code  :    Dove 

Thomas  Jones  and  William  Thompson 
are  trading  in  partnership  as  wholesale 
grocery  merchants,  sharing  profits  equal- 
ly. On  Jan.  1st,  1912,  their  balance  sheet 
is  as  follows : 

ASSETS. 

Stock  in  trade $27,245.00 

Furniture   2,752.00 

Debtors   37,625.00 

Cash   752.00 

Goodwill   5,000.00 

$73,374.00 

LIABILITIES. 

Bank  of  B.  N.  A $10,000.00 

Creditors    27,528.00 

Jones    25,243.00 

Thompson   ..._ 10,603.00 

$73,374.00 


An  agreement  is  made  to  amalgamate 
with  Joseph  Smith  and  George  Brown, 
also  trading  in  partnership,  and  sharing 
profits  respectively  %  and  Y^.  Their  bal- 
ance sheet  as  on  Jan.  1st,  1912,  is  as 
I^elow : 

ASSETS. 

Stock  in  trade  $35,424.00 

Furniture  3,840.00 

Debtors 42,741.00 

Bank  of  Toronto  3,415.00 

$85,420.00 


LIABILITIES. 

Creditors  $35,818.00 

Smith 22,176.00 

Brown    27,426,00 

$85,420.00 


A  company  is  formed  to  take  over  the 
business  under  the  name  of  Smith,  Jones 
&  Co.,  Limited,  with  an  authorized  capi- 
tal of  $200,000.00,  divided  into  2000 
shares  of  common  stock  at  $100  each. 
George  Wilkins,  John  Lister,  and  Robt. 
Ryder  subscribe  for  20  shares  each,  for 
which  they  pay  cash.# 

The  Jones  and  Thompson  business  is 
taken  over  at  book  figures,  except  that 
goodwill  is  raised  to  $10,000  and  $1000 
is  set  up  as  a  reserve  for  doubtful  debts. 
The  Smith  and  Brown  business  is  taken 
as  shown,  with  an  addition  of  $15,000 
for  goodwill  and  $1500  reserve  for  doubt- 
ful debts.  The  partners  in  the  two  busi- 
nesses  are  to  take  stock  for  their  interests, 
making  an  even  amount  by  paying  cash 
if  required.  All  cash  is  deposited  in  the 
Bank  of  British  North  America. 

Show  by  means  of  journal  entries  the 
various  transactions  incident  to  taking 
over  the  bu^sinesses  and  allotment  of 
shares,  giving  the  number  of  shares  al- 
lotted to  each  party,  and  make  out  the 
balance  sheet  of  Smith,  Jones  &  Co.,  Ltd. 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  A 


Code  :  Dow 

Give  fully  your  understanding  of  the  following  accounting  terms: 

1.  Deferred  Charges  to  Operations. 

2.  Bonded  Indebtedness. 

3.  Cost  of  Goods  Sold. 

4.  Capital  or  Fixed  Assets. 

5.  Surplus.  ^ 

6.  Profit  and  Loss  Account. 

7.  Current  Liabilities. 

8.  Suspense  Account. 

9.  General  or  Private  Ledger. 

10.  Sinking  Fund  Investment  Account 

11.  Controlling  Account. 

12.  Petty  Cash  Fund.  , 

13.  Cumulative  Preferred  Stock. 

14.  Partners'  Capital  Account.  ' 

15.  Organization  Expenses 

16.  Work  in  Progress. 

17.  Non-Productive  Labor. 

18.  Trading  Account. 

19.  Royalty  Paid  (Coal  Mining  Company). 

20.  Working  Capital. 

21.  Inrome  and  Expenditure  Account. 
23.  Contingent  Liability. 

22.  Re-Insurance  Recoveries  (Marine  Insurance). 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  A 


Code  :    Dowager 

Give    your    understanding   of   the    following   accounting 
terms: 

1.  Account  Sales. 

2.  Current  Account. 

3.  Wasting  Assets. 

4.  Certificate  of  Deposit. 

5.  Consignment  Account. 

6.  Gross  Profit. 

7.  Gross  Income.  1. 

8.  Cost  Ledger. 

9.  Contingent  Liability.  ! 

10.  Deferred  Credit  to  Income 

11.  Internal  Check. 

12.  Treasury  Stock.  • 

13.  Reserve  Fund. 

14.  Preliminary  Expenses. 

15.  Petty  Cash  Book. 

16.  Operating  Expenses. 

17.  Joint  Account. 

18.  Sinking  Fund. 

19.  Trade  Discount. 

20.  Preferred  Creditors. 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  A 

Code  :     Drama 

You  are  instructed  to  prepare  a  Statement  of  Affairs  of 
Samuel  Harris  as  at  Aug.  31,  1907.  Following  are  the  particu- 
lars: 

Accounts   Payable  $  4,000.00 

Bills  Payable  3,500.00 

Loan  from  Wm.  Jones  15,000.00 

Bank  Overdraft  1 ,000.00 

Accounts  Receivable  2,800.00 

Furniture  and  Fixtures  500.00 

Real  Estate  and  Improvements 5,000.00 

Merchandise 7,000.00 

Harris  his  other  merchandise,  to  the  amount  of  $5,000.00 
in  addition  to  the  $7,000.00  above  stated,  $1,200.00  of  which  is 
held  by  the  bank  as  security  for  the  overdraft,  and  $3,800.00  by 
Wm.  Jones  as  security  for  his  loan.  Jones  also  holds  a  first  mort- 
gage on  the  Real  Estate  and  Improvements.  Of  the  Accounts 
Receivable,  $300.00  are  considered  bad,  and  $250.00  are  expected 
to  realize  50%  of  their  face  value.  These  items  must  be  properly 
dealt  with,  and  the  deficiency  shown. 


Code:    Drive 

Idle  &  Stretch,  merchants,  are  unable  to  meet  their  obliga- 
tions. I^rom  their  books,  papers  and  information,  the  following 
particulars  relative  to  their  affairs  are  ascertained: 

Cash  on  hand ; $     250 

Accounts  Receivable:     Good,  $1,250;  Doubtful,  $600  (estimated  to 

produce  $200)  ;  Bad,  $1,000. 2,850 

Real  Estate  14,000 

Bills  Receivable  (good)   4,250 

Idle,  Drawing  Account 9,000 

Stretch,  Drawing  Account  8,400 

Sundry  Losses  on  Trading 13,500 

Trade   Expenses   7,400 

Creditors — Unsecured   '. 25,000 

Partly  Secured  23,900 

Fully  Secured  17,000 

Securities:    $5,000  in   hand;   $11,000   pledged   with   partly   secured 

Creditors ;  and  balance  pledged  to  fully  secured  Creditors 33,000 

Preferential  claims  for  Wages 750 

Idle,  Capital  10,000 

Stretch,  Capital  16,000 

Prepare  (a)  a  statement  of  affairs  showing  the  assets  and 
lia')ilities  with  respect  to  their  realization  and  liquidation ;  and 
(b)  a  deficiency  account  in  respect  of  the  deficiency  shown  by 
the  .statement  of  affairs. 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  A 


Code:   Driven 

Required :  The  journal  entries  to  be  made  on  the  books  of 
all  parties  mentioned  to  properly  record  the  following  trans- 
actions : 

June  18,  1914— 

Walton  &  Company  issued  to  Greaves  Manufacturing  Com- 
pany a  note  for  $947.69,  payable  three  months  after  date, 
without  interest. 

July  1,  1914— 

Greaves  Manufacturing  Company  transferred  said  note  to 
the  Holmes  Foundry  Machines  Company  on  account,  less 
discount  at  6%. 

July  28,  1914— 

Holmes  Foundry  Machines  Company  transferred  said  note 
to  G.  B.  Dean  &  Company,  less  discount  at  6%,  in  part  pay- 
ment of  a  bill  on  which  they  were  entitled  to  a  discount  of 
2%%  on  the  amount  paid.  G.  B.  Dean  &  Company  dis^ 
counted  the  note  at  the  bank  at  6%,  receiving  a  draft  on 
New  York  for  the  proceeds,  less  one-eighth  of  1%  exchange, 
which  they  remit  to  M.  Grace  &  Co.,  in  part  pa)mient  of  a 
bill  on  which  they  are  entitled  to  a  discount  of  3%  on  the 
amount  paid. 

September  18,  1914— 

Walton  &  Company  paid  the  note. 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  A 


Code  :    Drollery 

Describe  various  forms  of  cash  books  used  in  any  three  differ- 
ent kinds  of  businesses  with  which  you  may  be  familiar,  indi- 
cating in  what  respect  the  basic  principles  of  their  use  may  be  the 
same  or  similar,  and  whether  or  not  you  think  it  may  be  possible 
to  adopt  a  standard  method  of  recording  cash  receipts  and  dis- 
bursements in  the  case  of  all  corporations  having  a  fairly  large 
volume  of  business.    Give  reasons  for  your  answer. 

^*  *)»  <|*  'I*  JK 

In  connection  with  the  audit  of  the  books  of  a  corporation, 
describe  briefly  the  procedure  you  would  consider  to  be  essential 
in  verifying  the  following  assets,  liabilities  and  reserves: 

1.  Goods  in  Transit; 

2.  Capital  Stock  Outstanding; 

3.  Hills  Receivable; 

4.  Accrued  Taxes ; 

5.  Reserve  for  Bad  and  Doubtful  Accounts ; 

6.  Bills  Payable; 

7.  Cash  in  Bank  ; 

8.  Reserve  for  Allowances  and  Discounts. 

*^t  *jff  ^f  ^t 

J^  T*  T*  '^ 

The  following  particulars  are  extracted  from  the  statistical 
records  of  a  corporation : 

AVERAGE  NO.  OF  TIMES 

TURNOVER  STOCK  TURNED  OVER 

1910  $    500,000.00       $    50,000.00  10 

1911    900.000.00  100,000.00  9 

1912  1.000,000.00  125,000.00  8 

To  what  conclusions  do  these  figures  point  ? 

^^  ^F  ^C  ^S^  ^1^ 

^n  ^K  ^%  ^^  ^t^ 

A  Taxicab  Company  builds  and  repairs  its  own  vehicles,  and 
for  these  purposes  is  compelled  to  maintain  stock  in  large  quanti- 
ties of  accessories.  What  system  would  you  recommend  to  insure 
accuracy  in  distinguishing  between  the  cost  of:  (a),  repairs  and 
replacements,  and,  (b),  additions  to  capital? 

:):        ^        ^        :):        9|c 

You  have  been  requested  by  the  Sixteenth  National  Bank,  of 
Ballard,  to  make  a  verification  of  the  assets  and  liabilities  of 
Hammond  &  West,  a  partnership,  engaged  in  business  as  plumb- 
ing jobbers  and  contractors.  The  books  have  been  out  of  balance 
for  some  time,  and  you,  for  urgent  reasons,  cannot  continue  your 
examination  to  the  extent  of  locating  the  difference.  What  view 
would  you  take  of  this  situation  in  reporting  to  the  bank,  and 
would  it  make  any  difference  whether  the  discrepancy  were  under 
$10.00  or  over  $500.00,  and  whether  there  was  an  excess  of  debits 
or  an  excess  of  credits  ? 


(Continued  on  next  page.) 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  A 


Code  :     Drollery  —Continued 

One  of  the  most  important  considerations  in  connection  with 
any  audit  where  there  are  either  merchandise  stock,  raw  materials, 
work  in  progress  or  manufactured  stocks,  is  the  question  of  the 
proper  valuation  and  verification  of  the  inventories. 

With  proper  appreciation  of  the  importance  of  this  question, 
you  are  asked  to  outline  what,  in  your  opinion,  an  auditor  could 
and  should  do  to  insure  as  complete  a  verification  as  possible  of 
as  many  different  general  classes  of  inventories  as  may  readily 
occur  to  you. 


***** 

Percentages  of  gross  profit  are  calculated  on  the  selling  price 

of  goods  and  also  on  the  buying  price.     Give  illustrations  with 

figures  of  the  two  methods,  and  state  which  you  prefer  and  why. 

***** 

In  auditing  the  first  annual  Balance  Sheet  of  a  company,  you 
rind  the  following  items  on  the  debit  side : 

1.  Goodwill ; 

2.  Increase  in  value  of  Investments; 

3.  Commission  on  issue  of  Bonds; 

4.  Preliminary  Expenses ; 

5.  Loss  on  Consignment  Accounts. 

The  credit  side  shows  a  "Balance  of  Profit  and  Loss  Ac- 
count," and  the  directors  have  informed  you  they  intend  to  de- 
clare a  dividend.  Explain  fully  how  you  would  propose  to  deal 
with  each  of  the  five  items  referred  to  when  discussing  the  Bal- 
ance Sheet  at  the  next  Board  meeting,  which  you  have  been  re- 
quested to  attend. 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  A 


Code  :   Drone 

R.  Martin,  who  keeps  his  books  by  single  entry,  requests  you 
to  prepare  Trading  and  Profit  and  Loss  Accounts.  The  following 
information  is  handed  you: 

BALANCE  SHEET,  DEC.  31st,  1911. 

LIABILITIES. 

Bank    Overdraft   $   100.00 

Sundry  Creditors 680.00 

Capital  Account,  after  ad- 
justment of  Profits  and 
Drawings  830.00 


ASSETS. 

Cash    .$  40.00 

Sundry  Debtors  770.00 

Fixtures   60.00 

Stock  740.00 


$1,610.00 


$1.610.00 


BALANCE  SHEET,  JUNE  29rH,  1912. 

ASSETS.  LIABILITIES. 


Cash  at  Bank  $  30.00 

Cash  on  Hand  20.00 

Bills  Receivable  30.00 

Sundry  Debtors  910.00 

Fixtures    60.00 

Stock  940.00 


Sundry  Creditors .$   710.00 

Bills  Payable 60.00 

Capital  Account,  after  ad- 
judgment of  profits  and 
drawings    1,220.00 


$1,990.00 


$1.990.00 


SUMMARY  OF  CASH  BOOK. 
From  Jan.  1st  to  June  29th,  1912. 


To  Cash  on  hand .$     40.00 

To  Cash  Sales  430.00 

To  Credit  Sales  1,480.00 


$1,950.00 


By  Overdraft  at   Bank $   100.00 

By  Cash   Purchases  320.00 

By  Credit  Purchases  1,020.00 

By  Wages   75.00 

By  Rent   and    Taxes 100.00 

By  Lighting    35.00 

By  Drawings    120.00 

By  Sundry  Expenses  130.00 

Balance  at  Bank «.  30.00 

Balance  on  Hand 20.00 

$1,9500? 


.^. 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  A 


Code  :    Druid 

A  lumber  mill,  owing  to  slack  business,  stops  manufacturing,  but 
not  selling.  During  the  period  of  shut  down  the  mill  is  almost  entirely 
rebuilt;  the  old  machinery  thoroughly  overhauled;  new  and  additional 
machinery  added  and  an  entire  and  more  efficient  rearrangement  of 
the  entire  plant  had.  During  the  previous  six  years  the  book  value  of 
the  plant  has  been  reduced  by  the  following  depreciations: 

On  Buildings,  10%  per  annum  on  the  original  cost. 

On  Machinery,  6%  per  annum  on  the  original  cost. 

You,  as  Auditor  for  the  Company  are  asked  to  advise  to  what 
accounts  the  costs  of  rebuilding,  of  overhauling,  and  of  the  additions 
are  to  be  charged. 

Give  your  answer,  stating  fully  your  reasons. 

Also  advise  as  to  when,  in  your  opiniour  depreciation  should  be 
taken  into  consideration  on  the  rearranged  plant  if  active  operations 
are  not  resumed  for  six  months  after  the  completion  of  the  changes. 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  A 

Code  :    Duel 

A  manufacturing  corporation  had  an  appraisal  made  of  its 
buildings  and  machinery  with  the  result  that  the  appraised  values 
were  below  the  book  values.  The  difference  was  largely  account- 
ed for  by  the  fact  that  the  price  of  building  material,  labor  and 
some  classes  of  machinery,  at  the  date  of  appraisal,  were  lower 
than  they  were  when  certain  portions  of  the  plant  were  erected. 
On  the  other  hand,  the  value  of  the  real  estate  occupied  by  the 
plant  had,  since  its  purchase,  increased  to  an  extent  far  greater 
than  the  net  difference  between  the  book  value  and  the  appraised 
value  of  the  buildings  and  machinery. 

On  the  company's  books,  depreciation  on  buildings  and  ma- 
chinery had  been  regularly  written  off  on  the  basis  of  what  was 
considered  to  be  a  fair  percentage  of  the  original  cost. 

You  are  asked  to  give  your  opinion  as  to  whether  the  book 
value  of  the  buildings  and  machinery  should  be  reduced  to  the 
appraised  value,  and,  if  so,  whether  the  company  would  be  justi- 
fied in  appreciating  the  book  value  of  the  real  estate  either  to  its 
actual  value  at  the  date  of  the  appraisal  above  referred  to,  or  by 
an  amount  sufficient  to  cover  the  difference  between  the  book 
value  and  the  appraised  value  of  the  buildings  and  machinery. 

Prepare  a  brief  report  to  the  company  embodying  your  sug- 
gestions. 


Code  :    Duet 

A  company  desirous  of  extending  its  premises  obtains  esti- 
mates for  the  work  from  builders,  the  lowest  of  which  is  $20,000. 
On  consideration  of  the  circumstances,  the  directors  of  the  com- 
pany decide  to  carry  out  the  work  by  means  of  their  own  staff, 
and  after  completion  the  additional  premises  figure  in  their 
balance  sheet  at  $20,000.00,  made  up  as  follows : 

Net  cost  of  materials  purchased $  6,500.00 

Discount  thereon  transferred  to  Interest  and  Discount  Account....       150.00 

Labor  on  erection  11,200.00 

Supervision  by  management  (part  of  the  annual  salaries) 500.00 

Proportion  of  office  expenses 250.00 

Interest  on  outlay  to  date  of  completion 200.00 

Profit,  transferred  to  Profit  and  Loss  Account 1,200.00 

$20,000.00 


What  view  should  an  auditor  take  of  this  transaction  and  of 
the  various  items  involved? 

See  ''Accounting  Principles,  Chapter  XII,  Articles  Prepared 
for  u.se  of  Firm." 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  A 

Code  :    Duke 

At  the  close  of  the  fiscal  year  the  books  of  an  Engineering 
Construction  Company  show  the  condition  of  certain  uncom- 
pleted contracts  as  follows: 

Contract  No.  1 — This  is  a  **cost  plus  percentage"  contract 
on  which  the  company  gets  cost  of  materials  and  labor  plus  10% 
thereon  for  its  services.  The  contract  account  shows  cost  to 
date  of  materials  and  labor  to  have  been  $50,000.00,  in  addition 
to  which  the  company's  expenses  on  the  contract  have  been 
$2,000.00. 

Contract  No.  2 — This  is  a  contract  taken  at  the  inclusive 
price  of  $100,000.00.  It  is  estimated  to  be  three-fifths  completed, 
and  the  cost  to  date  is  $50,000.00. 

Contract  No.  3 — This  is  a  contract  taken  at  the  inclusive 
price  of  $50,000.00.  It  is  estimated  to  be  four-fifths  completed, 
and  the  cost  to  date  is  $45,000.00. 

Show  how  as  auditor  you  would  expect  each  of  these  con- 
tracts to  be  dealt  with  in  closing  the  books  for  the  year. 


Code:    Dummy 

What  should  you  debit,  for  each  of  the  following  purchases 
made  on  July  1st,  for  a  business  that  closed  its  books  on  December 
31st  preceding: 

(a)  A  new  machine,  costing  $1,600,  purchased  to  take  the 
place  of  an  old  one  exactly  similar  that  cost  $1,500  four  years 
ago,  which  had  been  written  down,  by  annual  credits,  to  $300, 
and  which  was  applied  as  part  payment  toward  the  new  one  at 
an  allowance  of  $150  ? 

(b)  A  new  machine  costing  $1,200,  purchased  to  take  the 
place  of  one  exactly  similar  that  cost,  originally,  $1,500,  which 
had  been  written  down  to  $300,  and  which  was  applied  as  $150 
toward  the  purchase  price  of  the  new  one,  supposing  that  a  fund 
of  $1,350  had  been  accumulated  toward  the  replacement  of  the 
old  machine? 

(c)  A  machine  costing  $1,000,  purchased  to  replace  a  similar 
new  one  which  had  been  destroyed  by  the  capsizing  of  a  boat  in 
an  attempt  to  convey  equipment  for  a  mill  into  a  country  acces- 
sible only  through  dangerous  rapids  ? 

See  "Accounting  Principles,  Chapter  XTl. 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  A 


Code:    Dungeon 

A  fire  occurred  in  the  factory  of  a  firm,  and  the  following 
sums  were  recovered  from  the  insurance  companies: 

For  loss  on  Buildings   .$  4,000 

Machinery  6,500 

Merchandise  10,000 

$20,500 

The  firm  spent,  in  restoring  them  to  their  original  condition, 
$4,750  on  the  buildings  and  $6,000  on  the  machinery.  They  also 
spent,  in  cleaning  and  sundries  incidental  to  the  fire,  $100. 

The  firm's  valuation  of  the  merchandise  lost  and  damaged 
was  $11,600.  After  the  fire  $1,000  was  realized  from  the  sale  of 
damaged  stock. 

Prepare  journal  entries  to  show  how  the  above  matters  should 
be  dealt  with  on  the  firm's  books. 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  A 


Code  :    Dust 

Give  your  opinion  as  to  the  proper  methods  for  valuing  the 
inventories  of  the  following  kinds  of  businesses: 

(1)  Breweries. 

(2)  Wholesale  Liquor  Merchants. 

(3)  Grain  and  Feed  Merchants. 

(4)  Salmon  Cannery  Companies. 

(5)  Lumber  Manufacturing  Companies. 


Code  :    Dustless 

What  are  the  units  of  output  or  earning  used  in  the  prep- 
aration of  cost  accounts  for  the  following  classes  of  busi- 
nesses? 

1.  Lumber  Manufacturing. 

2.  Breweries. 

3.  Logging. 

4.  Salmon  Packing. 

5.  Coal  Mining. 

6.  Brick  Manufacturing. 

7.  Steam  Railroads. 

8.  Electric  Light  Plant. 

9.  Gold  Mining. 

10.     Iron  and  Steel  Manufacturing. 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  A 


Code  :     Dutch 

The  following  is  a  Trial  Balance  of  a  manufacturing  com- 
pany at  the  end  of  12  months,  before  making  any  closing  entries : 

Dr.  Cr. 

Machinery  $  57,081.00    $ 

Tools  and  Equipment  54,981.00 

Land 5,000.00 

Buildings  54,021.00 

Patents  and  Goodwill  31,847.88 

Merchandise  Inventory  at  beginning  of  year 94,080.38 

Material  purchases 249,154.46 

Labor  115,173.67 

Manufacturing  Expenses  45,565.61 

Accounts  Receivable  ^  80,113.17 

Cash 16,005.82 

Insurance  Unexpired  305.37 

Capital  Stock  100,000.00 

Unissued  Capital  Stock  32,750.00 

Sales  of  Scrap 9,955.40 

Bills  Payable  35,000.00 

Returns  and  Allowances  11,275.55 

Cash  Discount ^..  5,837.84 

Interest  Paid  on  Loans 2,0C9.83 

General  Expense  6,698.82 

Selling  Expense  7,991.19 

Packing  and  Shipping  Expense  3,678.79 

Expense  moving  Plant  to  new  quarters  2,145.47 

Accounts  Payable,  including  Wages 67,334.12 

Taxes  Accrued  3,652.68 

Sales 503,359.18 

Interest  Received  5,501.28 

Reserve  for  Depreciation 34,535.52 

Reserve  for  Bad  Debts 2,249.26 

Surplus  at  beginning  of  year  114,129.41 

$875,716.85    $875,71685 

The  accounts  at  the  beginning  of  the  year  may  be  accepted  as 
correct.  At  the  close  of  the  year  the  following  matters  require 
consideration  : 

The  Merchandise  Inventory  is  found  to  be  of  a  value  of 

$98,062.06. 
The  amount  of   Insurance  Unexpired   is   found  to  be 

$505.37. 
A  review  of  the  Accounts  Receivable  sTiows  that  a  total 
reserve  of  $5,000.00  is  required  for  bad  debts  at  the 
close  of  the  year. 
Depreciation  should  be  provided  at  the  following  rates: 

Machinery  5% 

Tools  and  Equipment  10% 

Buildings  3% 

(These  rates  are  to  be  calculated  on  the  debit  balances  at 

the  close  of  the  year.) 

Your  audit  shows  unrecorded  liabilities  at  the  date  of  the 
closing,  as  follows: 

Affecting  Manufacturing  Expenses  - $2,000.00 

Affecting  General  Expenses  „ 1,000.00 

Affecting  Selling  Expenses 1,000.00 

1.  Prepare  Balance  Sheet  as  at  the  close  of  the  year. 

2.  Prepare  Profit  and  Loss  Account  for  the  year  with  such 

percentages  as  you  think  would  be  useful  or  interesting 
to  the  client. 


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\ 


Practical  Problems 

Graded 


Series  "B" 


^^iMl- 


BY 


Samuel  F.  Racine 

Certified  Public  Accountant 


NO        n\\^ 

Columbia  ?Hntoer2!itp  2- 

tn  tlie  Citp  of  ^etn  l^orb 


LIBRARY 


School  of  Business 


t  - 


f 


Practical  Problems 

Graded 


Series  "B" 


BY 


Samuel  F.  Racine 

Certified  Public  Accountant 


^^, 


/ 


// 


G^   0  6' 


COPYRIGHT   1920 

BY 

SAMUEL  F.  RACINE 


3  ^10 


PUBLISHED    BY 

THE  WESTERN  INSTITUTE  OF  ACCOUNTANCY 

COMMERCE  AND  FINANCE 

LEARY  BLDG-  SEATTLE,  WASH. 


»' 


Accounting  Students'  Series 

By  Samuel  F.  Racine,  C.  P.  A. 

Graded  Corporation  Problems,  1914  and  1918;  containing 
the  most  severe  C.  P.  A.  examination  problems  used  up  to  the 
year  of  publication,  1914;  since  revised  and  brought  down  to 
date,  1918. 

Guide  to  the  Study  of  Accounting,  1916,  containing  ana- 
lytical questions  similar  to  the  preceding  Guide  to  the  Study  of 
Accounting,  but  practically  a  new  book,  owing  to  the  advent  of 
new  books  of  recognized  authority. 

Guide  to  the  Study  of  Auditing,  1916.  The  publication  of 
a  new  Montgomery's  Auditing  required  that  the  original  Guide  to 
Auditing,  with  a  new  set  of  analytical  questions,  be  rewritten, 
hence  the  1910  book. 

Practical  Problems,  Series  "A,"  1916 ;  containing  the  great 
majority  of  the  C.  P.  A.  examination  questions  used  in  the  State 
of  Washington.    This  book  has  been  revised  three  times. 

Practical  Problems,  Series  "C"  (In  preparation). 

Accounting  Principles,  1917.  A  new  book  originally  writ- 
ten in  1913,  containing  much  subject  matter  not  found  in  other 
books  on  accounting.  Assuredly  it  contains  more  information 
than  any  other  single  book  on  the  subject. 

Syllabus  of  Bookkeeping,  1918.  As  with  all  of  Mr.  Racine's 
books,  originality  is  the  keynote  of  the  Syllabus  of  Bookkeeping. 
There  is  nothing  else  like  it  in  print.  It  is  hoped  that  it  will 
simplify  the  method  of  instruction  in  bookkeeping  to  an  extent 
not  considered  possible  by  other  instructors  of  the  present  day. 
It  is  designed  to  combine  the  advantages  of  lectures  with  the  other 
usual  methods  of  bookkeeping  instruction  and  is  proving  a  decided 
success  in  the  class  rooms  of  The  Western  Institute  of  Account- 
ancy, Commerce  and  Finance. 

Annuity  Studies,  1918 ;  a  set  of  rules  easy  to  understand, 
with  problems  on  annuities. 

Cost  Accounts  (In  preparation). 


PRACTICAL  PROBLEMS,   GRADED,  SERIES  B 

Code  :    Earth 

A  company  issues  more  than  10,000  checks  annually  on 
three  different  banks  with  which  it  does  business,  recording 
every  check  on  the  corresponding  check  book  stub,  and  then 
entering  them  in  detail  in  the  general  cash  book,  where 
charges  are  made  to  the  various  operating,  expense,  or  other 
ledger  accounts  for  which  the  disbursements  have  been 
made.  Suggest  such  changes  in  these  methods  as  would 
facilitate  the  work  and  point  out  the .  advantages  to  be  gained 
thereby. 


< 


PRACTICAL  PROBLEMS,   GRADED,  SERIES  B 

Code  :   Ease 

A  wholesale  house  has  on  its  books  300  individual  accounts 
with  creditors,  500  with  city  customers,  and  500  with  country 
customers,  besides  about  75  impersonal  or  representative  accounts. 
Owing  to  the  methods  of  bookkeeping  in  force,  it  is  necessary 
in  order  to  ascertain  the  amount  of  accounts  receivable  or  pay- 
able to  take  off  a  complete  list  of  the  accounts  in  question.  You 
are  called  upon  to  advise  as  to  how  this  difficulty  can  be 
overcome,  and  also  as  to  whether  the  bookkeeping  work  on  ac- 
counts payable  cannot  be  reduced,  having  regard  to  the  fact  that 
the  firm  discounts  all  of  its  bills. 

Embody  your  suggestion  in  a  brief  report. 


Code  :    Easter 

The  private  ledger  of  a  business  contains  two  kinds  of  in- 
formation: matters  desired  to  be  withheld  from  the  knowledge 
of  the  general  bookkeeper,  and  summaries  of  all  the  business 
whether  known  to  the  general  bookkeepers  or  not.  The  following 
facts  are  to  be  kept  from  the  knowledge  of  the  general  bookkeep- 
ers, except  that  in  this  case  the  bookkeepers  must  know  the 
amount  of  all  changes  in  cash. 

Show  what  entries  will  be  made  on  the  private  books  and 
what  on  the  general  books. 

Partner  "A"  draws  $1,000  salary. 
Partner  "B"  lends  $5,000  to  the  business. 
Partner  "A"  transfers  to  the  business,  as  investment,  a  build- 
ing worth  $25,000. 
Taxes  are  paid  on  the  building,  $500. 
Commission  is  paid  to  an  employee,  $500. 
A  special  discount  is  given  to  a  customer,  $50.  • 

The  inventory  of  merchandise  is  found  to  be  $89,000,  and, 
after  transferring  sales  of  $300,000  and  purchases  of 
$250,000  from  the  general  to  the  private  books,  the  profit 
on  merchandise  is  found  to  be  $65,000. 
Profits  are  distributed  to  partners  "A"  and  "B"  in  cash, 
$12,000  each.. 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  B 


Code  :    Ebb 

For  a  manufaxjturing  concern  you  have  the  following  data 

from  which  to  make  up  the  annual  statements  as  at  December 

31,  1911  (prior  to  audit): 

Dr.  Cr. 

Stock    on    Hand — General     Manufacturing 

Accounts    Jan.    1,    1911 $40,000.00 

Stock  on   Hand — Brass  Foundry  Accounts 

Jan.    1,    1911 35,000.00 

General  Expenses    3,303.65 

Machinery  Repairs   l,29t>.81 

Keal  ii^state  and  Building 28.446.33 

Commissions     5,838.65 

J?  reight — General  Accounts   1,852.00 

— Brass  Foundry 367.97 

Interest    2,280.40 

Wages— General  Factory    24,621.88 

— Brass  Foundry   9,924.87 

Traveling  Expenses    665.05 

Plant  and  Machinery 57,407.66 

Salaries     6,294.84 

Accounts   Receivable 14,939.12 

insurance     500.43                   .       I 

Coal  800.05 

Cash  on  Hand  and  in  Bank 336.22 

Taxes    ^ 421,71 

Building  Repairs 30.91 

Interim  Dividend  paid  July,  1911 2,247.50 

Heat  and  Light 1,359.04 

Office  Furniture  and  Fixtures 527.33 

Legal  Expenses    1,599.30 

Purchases — General  Factory 95,000.00 

— Brass  Foundry 95,000.00 

Sales — Brass  Foundry  Accounts |148,589.24 

'*     — General   Manufacturing  Accounts..  152,444.61 

Capital   Stock    100,000.00 

Bills  Payable    2,723.44 

Accounts  Payable   3,848.30 

Profit  and  Loss — Special  Rebates 2,000.67 

Reserve  for  Depreciation,   Building 6,455.46 

Reserve  for  Bad  Accounts 4,000.00 

Reserve   for   Depreciation,   Plant  and   Ma- 
chinery       10,000.00 

$430,061.72     $430,061.72 
Inventory,  December  31,  1911:  ______  = 

General   Factory    $31,136.42 

Brass   Foundry    16,318.08 

Prepare  (1)  Trading  Account;  (2)  Profit  and  Loss  Ac- 
count; (3)  Surplus  Account;  (4)  Balance  Sheet  for  the  twelve 
months'  business  ending  December  31,  1911.  The  gross  profit 
of  each  department  to  be  shown  separately. 

After  making  your  statements  from  the  figures  as  fur- 
nished you  above  you  are  informed  that  the  following  errors 
have  been  found  to  have  occurred  in  them  and  are  requested  to 
rectify  your  statements  accordingly: 

(a)  Of  the  $40,000.00  given  as  the  Factory  stock  on  Jan- 
uary 1,  1911,  13,000.00  was  in  fact  patterns. 

(b)  Of  the  $35,000.00  stock  of  Brass  Foundry  on  the  same 
date  $1,000.00  should  have  been  charged  to  Plant  and  Machin- 
ery. 

(c)  Of  the  amount  charged  to  Factory  wages  ($24,621.88) 
$600.00  was  spent  on  Improvement  of  Patterns  and  is  now  to 
be  charged  to  that  account. 

(d)  Of  the  interest  item  ($2,280.40)  $150.00  was  not 
earned  prior  to  December  31,  1911. 

(e)  There  are  wages  accrued  due  and  unpaid  to  Decem- 
ber 31,  1911  of  Factory,  $1,200.00;  Foundry,  $1,000.00. 

Make  amended  statements. 

Note:     Apportion   unexplained   items   one-half  to   each   department. 
Provide  10%  depreciation  on  plant  and  5%  on  buildings. 


%• 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  B 


Code :    Elder 

The  output  of  the  A.  B.  C.  Coal  Company  for  the  year  end- 
ing Dec.  31,  1911,  was  1,576,833  tons,  and  the  trial  balance  at 
that  date  was  as  follows: 

Plant  and  Machinery $5,000,000.00     $ 

Construction  „ 85,750.50 

Bills  Receivable 63,000.00 

Accounts  Receivable  21,650.29 

Cash   98,752.31 

Materials,  etc 145,853.20 

Coal  on  hand,  Jan.  1,  1911  (9,000  tons) 12,750.36 

Wages 1,973,376.89 

Supply  Purchases 389,442.20 

Injuries  to  Persons  10,000.00 

Salaries    45,750.00 

Insurance  20,482.00 

Taxes   „ 26,597.40 

Office  Expenses  29,872.50 

Legal  Expenses  36,731.09 

Dividends    _ _ .'. 150,000.00 

Rentals  and  Royalties 262,530.20 

Freight,  Outward  361,951.17 

Horse  and  Wagon  Hire  109,532.10 

Discounts  and  Allowances  94,321.60 

Miscellaneous  Expenses  ~ - 8,750.21 

Capital  Stock  5,000,000.00 

Sales  „ 3,857,642.76 

Accounts  Payable  89,451.26 

$8,947,094.02     $8,947,094.02 


Coal  on  hand,  per  inventory,  $15,903.00. 

Supplies,  per  inventory,  $8,000.00. 

Materials,  per  inventory,  $5,000.00. 

From  the  foregoing  prepare  a  Balance  Sheet  and  Income 
and  Profit  and  Loss  Account,  the  latter  to  show  gross  earnings, 
net  earnings,  per  cent  of  expenses  to  gross  earnings,  average 
cost  per  ton  (carried  to  four  decimal  places)  and  average  net 
earnings  per  ton  (carried  to  four  decimal  places). 


PRACTICAL  PROBLEMS,   GRADED,  SERIES  B 


Code  :    Elect 

At  the  close  of  business  on  February  29,  1916,  you  are  re- 
quired to  make  an  examination  of  the  Mukilteo  State  Bank. 
Prepare  a  condensed  Balance  Sheet  and  Profit  and  Loss  Account 
for  the  period  since  the  books  were  last  closed  and  indicate  your 
procedure  in  making  the  examination. 

The  trial  balance  as  obtained  by  you  from  the  general  ledger 
of  the  bank  was  as  follows : 


DR. 

Loans  and  Discounts  $422,881.18 

Overdrafts 7,446.84 

Stocks,  Bonds  and  Warrants _ 34,256.38 

Premiums  on  Bonds  397.82 

Furniture  and  Fixtures  3,000.00 

General  Expenses  1,445.32 

Salaries   3,245.00 

Rent   1,800.00 

Interest  Paid  2,418.12 

Railroad  National  Bank,  Seattle 85.891.68 

Edmonds  National  Bank  4,928.40 

Second  National  Bank,  Kirkland 10,430.81 

Coppersmiths'  National  Bank,  New  York 20,814.82 

Ocean  National  Bank,  New  York 13.003.06 

Lake  Erie  National  Bank,  Chicago 17,056.68 

Wimbago  Trust  Co.,  St.  Louis 13,760.26 

Nineteenth  National  Bank,  Los  Angeles 32,624.55 

Willamette  National  Bank,  Portland 43,279.47 

Remittance  Account „ 1,617.18 

Exchanges  for  Clearing  House 15,225.32 

Cash  on  Hand  *. 75,608.33 

Over  and  Short 5,43 

Capital  Stock  

Surplus    

Undivided   Profits  

Safe  Deposit  Vault  Rentals „ 

Exchange    

Interest  and  Discount  

Individual  Deposits  

Bank  Deposits  „ 

Demand  Certificates  of  Deposit 

Cashiers'  Checks  

Certified  Checks  

Savings  Deposits  

Time  Certificates  of  Deposit 

Reserve  for  Taxes 


$ 


CR. 


50,000.00 

35,000.00 

9,806.98 

135.00 

756.05 

10,186.45 

420,047.31 

68,964.76 

1,153.31 

806.50 

600.12 

57,405.31 

156,155.66 

119.20 


$811,136.65    $811,136.65 


PRACTICAL  PROBLEMS,  GRADED,  SERIES   B 


Code  :   Electric 

You  are  consulted  by  a  manufacturer  who  is  considering 
the  installation  of  a  cost  accounting  system.  After  a  preliminary 
discussion,  he  asks  you  to  submit,  for  his  further  consideration, 
a  report  in  writing  setting  forth  fully  the  advantages  of  cost- 
accounting  and  the  inadequacy,  in  a  manufacturing  business,  of 
a  commercial  accounting  system.     Prepare  the  report  asked  for. 


PRACTICAL  PROBLEMS,   GRADED,  SERIES  B 


Code  :    Electrician 

The  Alpha  Quarries  Company  on  January  1,  1913,  call  you  in 
to  straighten  out  the  books.  You  find  the  following  items  on  the 
Trial  Balance: 

Coal   - $      900.00    $ 

Expense    500.00 

First  National  Bank  12,160.87 

Insurance    484.70 

Land  and  Improvements  100,000.00 

Machinery  and  Tools 22,143.70 

New  Plant 17,927.20 

New  Process 1,000.00 

Old  Plant  17,000.00 

Bond  Account 17,872.14 

Profit  and  Loss 69,909.99 

Repairs 750.00 

Sand  - 1,890.00 

Stock 75,000.00 

Stripping  „ 543.98 

J.  C.  Rollins 235.00 

D.  H.  Brill .» 8,500.00 

E.  J.  Brill 1,500.00 

C.  Austin _ 1,300.00 

American  Car  &  Foundry  Co 1,689.99 

R.  B.  Brill 2,238.00 

R.  B.  Brill 5,000.00 

F.  Howell  3,081.59 

F.  Howell,  Special  10,000.00 

Accounts  Receivable  7,787.08 

$189,707.12    $189,707.12 


f* 


It  develops  that  on  March  1,  1912,  a  first  mortgage  had  been 
placed  uopn  the  entire  property  of  the  company  to  secure  a  bond 
issue  of  even  date  $100,000.00,  6%  interest  payable  semi-annually 
after  January  1,  1913.  The  Desirable  Trust  Co.  was  the  trustee 
under  the  mortgage  and  money  was  secured  and  deposited  from 
time  to  time  on  sale  of  the  bonds  as  follows : 


April    9-12 

$  7,000.00 

$95.00  and  accrued  interest 

10-12 

1,000.00 

95.00    • 

1         (1             « 

12-12 

3,000.00 

90.00    ' 

1         «     .        « 

13-12 

3,000.00 

87.50    • 

1               u                     u 

16-12 

2,000.00 

87.50    ' 

1              tt                    t* 

May      1-12 

500.00 

90.00    ' 

1              f(                     If 

25-12 

7,000.00 

90.00    ' 

1             «                   « 

25-12 

5,000.00 

90.00    • 

1             «                   (f 

28-12 

14,500.00 

90.00    '* 

I             ((                   « 

July    16-12 

5,000.00 

95.00    ' 

t                   «                            M 

Dec     6-12 

1,000.00 

95.00    • 

(                  ((                          M 

^   The  analysis  of  the  book  account  for  proceeds  from  bonds, 
including  the  above  sales,  appears  as  follows: 

(Continued  on  next  page.) 


«• 


PRACTICAL  PROBLEMS,     GRADED,  SERIES  B 


Code:    Electrician — (Continued) 

Debit 

Credit 

April     4-12 

Interest  paid  on 

aid  M'rtgage..$        22.36 
V^%  Mtg.  Tax..        500.00 

April 

18-12 

Sale  of  $16,500 
Bonds  and  In- 
terest     $  15,386.09 

Trustee's    fee....        173.59 

Sept. 

13-12 

Interest  on   De- 

27-12 

Stationery       r  e 

posit    181.50 

Bond    Issue...             8.20 

Dec. 

6-12 

Sale    of    Bonds 

May       1-12 

Attorney's  fees..        550.00 

and    Interest..        995.83 

Dec.     30-12 

Bond  Interest....     2,450.00 

Trustee  account 
handling   cou- 
pons              37.50 

Dec. 

13-12 

Sale  of   Bonds..     4,862.50 

Interest  on  De- 
posits            181.50 

Interest  on  De- 
posits                6.37 

$  3,741.65 

$21,613.79 

A  stock  dividend  of  ^G^s^c  was  declared  payable  as  of  April 
1,  1912,  coincident  with  an  increase  in  authorized  capital  from 
$75,000.00  to  $200,000.00.  Additional  stock  was  subscribed  as 
follows : 

R.  B.  Brill  $  5,000.00 

F.  Howell  „.- 10,000.00 

E.  J.  Brill -...- 1,500.00 

D.  H.  Brill 8,500.00 

J.  C  Rollins » 7,000.00 

Geo.  S.  Smart 1,000.00 

The  Smart  item  was  paid  for  by  Engineering  services  in 
connection  with  the  new  plant. 

Formulate  journal  entries  in  adjustment  of  the  books  and 
show  corrected  Trial  Balance. 


«• 


PRACTICAL  PROBLEMS,     GRADED,   SERIES  B 


Code  :    Electricity 

The  Star  Department  Store  organized  January  1,  1911,  suf- 
fers a  complete  fire  loss  just  before  inventory  December  31,  1913. 
The  books  disclose  the  following  facts : 

Dec.  91-11  Dec.  31-12  Dec.  31-13 

Inventory  Beginning  $  44,244.04  $  51,894.68  $  50,396.40 

Purchases    during    Year 171,133.33  173,478.81  157,188.09 

Allowances  on  Purchases 11,900.12  15,182.62  8,293.54 

Sales    197,474.49  209,397.00  195,937.98 

Allowances  on   Sales 4,294.37  4,594.50  5,179.19 

Advertising    3,487.39  3,334.45  2,987.56 

Salaries  8,295.92  9,196.72  9,196.72 

Wages   16,684.30  16,628,75  17,531.22 

Delivery    567.34  567.38  1,053.34 

Depreciation    on    Furniture 169.31  372.92  112.94 

Stationery    and    Printing 282.40  309.30  300,00 

Gas  75.09  46.55  62.02 

Rent  5,350.00  5,400.00  5,400.00 

Insurance  „ 927.15  856.42  770.40 

Interest  .~ 1,571.02  1,506.89  1,695.80 

Light   612.53  567.40  625.06 

Water    29.21  28.51  27.63 

Taxes    438.80  »  697.00  891.07 

Telephone  33.75  52.27  54.00 

General   2,041.30  3,343.37  2,581.32 

Traveling    352.94  351.93  278.28 

Furniture  and  Fixtures  Depreciated 9,000.00  9,500.00  10,500.00 

You  are  asked  by  the  appraisers: 

(1)  To  determine  the  value  of  assets  destroyed. 

(2)  Arrive  at  correct  amounts  to  effect  a  complete  adjust- 
ment under  the  following  concurrent  policies  containing 
the  80%  co-insurance  clause: 

Home  Insurance  Company  $10,000.00 

Glen  Falls  Insurance  Company 15,000.00 

Globe  Insurance  Company  5,000.00 

Equitable  Insurance  Company  10,000.00 

(3)  Assuming  the  property  loss  to  have  been  50%,  what 
amounts  would  have  been  the  proper  adjustments? 


PRACTICAL  PROBLEMS,     GRADED,  SERIES  B 

Code  :    Electricute 

By  reason  of  the  death  of  its  founder,  the  J.  E.  Smith  Wire 
&  Iron  Company  organized  in  1885  is  obliged  to  reorganize  or 
consolidate  with  your  client,  a  competitor  concern.  A  tentative 
offer  is  made  by  the  attorney  for  the  heirs.  The  following  facts 
are  issued  by  the  attorney,  together  with  the  accompanying  propo- 
sition : 


Assets 

Cash  on  Hand  and  in  Bank $  920 

Accounts   Receivable  89,000 

Bills   Receivable  30,000 

Merchandise    150,000 

Plant,    Machinery   and    Equip- 
ment      250,000 

Deferred  Charges  880 


Liabilities 

Wages  Payable  $  4,000 

Accts.    Payable   75,000 

Bills  Payable  115,000 

Accrued   Charges  1,590 

Capital    100,000 

Surplus  225,210 


$    520,800 


$    520,800 


Annual  sales,  $500,000.00;  Expenses,  $450,000.00;  Annual 
Profits,  $50,000.00. 

Attorney  offers  to  sell  for  the  amount  of  the  net  earnings 
capitalized  at  5%. 

On  examination  you  find  the  following  record  and  facts : 


1909 

1910 

Net  Sales 

$350,000.00 

400,000.00 

Cost  of  Sales 
$200,000.00 
250,000.00 
300,000.00 
400,000.00 
360,000.00- 

Selling  Exp'se 
$50,000.00 
60,000.00 
70,000.00 
80,000.00 
75,000.00 

Admin.  Exp'se 
$40,000.00 
45,000.00 
50,000.00 
55,000.00 
15,000.00 

Net  Profit 

$60,000.00 

45,000.00 

30,000.00 

1  ^  000  00 

1911 

1912 

450,000.00 

550,000.00 

1913 

500,000.00 

50,000.00 

Analysis  of  the  expenses  shows  that  the  various  elements  are 
regular  except  that  the  proprietor's  salary  which  had  appeared 
for  several  years  at  $25,000.00  had  not  been  credited  in  1913,  but 
appeared  as  a  charge  among  Accounts  Receivable.  Other  accounts 
receivable  warranted  a  scaling  down  on  account  of  doubtful 
debts  extending  over  three  years  respectively:  1911,  $6,000.00; 
1912,  $9,000.00;  1913,  $10,000.00;  total,  $25,000.00.  Bills  Re- 
ceivable were  uncollectable  to  the  amount  of:  1911,  $3,000.00; 
1912,  $2,000.00;  1913,  $4,000.00. 

Inventory  was  found  to  include  obsolete  and  defective  stock 
to  the  amount  of  $20,000.00,  distributable  over  the  5  years. 
Liabilities  on  account  of  merchandise  purchased  and  inventoried, 
but  omitted  from  the  books,  $10,000.00.  You  find  that  no  ap- 
praisal ever  has  been  made  of  the  plant  and  equipment,  and  no 
depreciation  charged  off  during  the  history  of  the  business,  al- 
though the  plant  is  in  good  repair. 

Prepare  a  report  to  your  client  making  such  recommendations 
as  you  consider  feasible,  and  containing  such  exposition  of  facts 
by  way  of  exhibits  as  you  consider  necessary  to  convince. 


<* 


PRACTICAL  PROBLEMS,    GRADED,  SERIES  B 


Code  :    Electrify  * 

Determine,  from  the  following  particulars,  the  book  balances 
of  Plant  "B"  of  the  United  Finishing  Company,  January  1,  1913, 
and  raise  intermediate  accounts.  All  purchases  are  made  by  the 
main  office  as  well  as  payments  of  wages,  expenses,  etc.  Sales 
are  made  direct  and  collections  are  remitted  to  the  main  office 
in  the  same  form  as  received.  The  operations  during  the  year 
1913  were  as  follows: 

Raw  Material  and  Supplies  purchased $320,000.00 

Wages  accrued  and  paid '. 125,000.00 

Expenses  distributed  to  operations 70,000.00 

Expenses  accrued  and  paid  75,000.00 

Charge  Sales 425,000.00 

Cash  Sales 500.00 

Cost  of  finished  product 400,000.00 

Cost  of  sales 380,000.00 

Allowances  to  customers 5,000.00 

Collections  from  charge  customers 410,000.00 

Raw  material  entered  manufacture 300,000.00 

The  following  balances  appear  on  closing  : 

Inventory  (raw)  ^ $  25,000.00 

Imprest  Cash  1,000.00 

Accrued  Payroll  Liability  2,000.00 

Inventory  in  Process 142^000.00 

Expenses  not  distributed  to  operating 15!oOO.OO 

Accounts  Receivable — Good  .". 70,000.00 

Accounts  Receivable— Doubtful 5,000  00 

Inventory  (finished)  ^ 34^500.00 

Reserved  for  Bad  Debts 5  00000 

Surplus    20[500!00 


PRACTICAL  PROBLEMS,    GRADED,  SERIES  B 


Code  :    Electrine 

In  an  audit  of  the  Atme  Motor  Car  Company  you  find  the 
reserve  for  Depreciation  account  and  the  Surplus  account  com- 
posed of  the  items  as  here  enumerated. 

The  Reserve  for  Depreciation  account  was  opened  on  Dec.  31, 
1915,  the  close  of  the  first  business  year,  by  debiting  the  depre- 
ciation accounts  of  the  various  assets  with  $205,000. 

The  Reserve  for  Depreciation  Account  was  also  credited  with 
$25,000  on  Dec.  31,  1916,  and  with  $20,000  on  Dec.  31,  1917. 

During  1916  and  1917  the  following  items  have  been  charged" 
against  this  Reserve  for  Depreciation  account : 

Assets  Scrapped $125,000 

Bad  Debts  25,000 

Repairs  - 10,000 

Fire  Loss  on  Building  and  Equipment 7,500 

Organization  Expenses  65,000 

Salesmen's  Extra  Commission 12^000 

The  surplus  account  for  1915  and  1916  has  been  closed,  the 
balance  having  been  paid  out  in  dividends. 

The  surplus  account  on  December  31,  1917,  is  found  to  consist 
of  the  following  credit  items : 

Reserve  for  Car  Guarantees  $  50,000 

Premium  on  Stock  Sold 50,000 

Reserve  for  Obsolescence 5o!oOO 

Bonus  from  Commercial  Club 50^000 

Reserve  for  Income  and  Excess  Profits  Taxes,  1917 80,000 

Operating  Profits 750,000 

You  are  requested  to  make  such  adjustments  in  the  Reserve 
for  Depreciation  account  and  Surplus  account  as  are  appropriate, 
and  to  show  how  the  several  items  and  accounts  should  appear 
in  the  financial  statement. 


PRACTICAL  PROBLEMS,    GRADED,  SERIES  B 


Code:    Electro 

A  receiver  who  has  been  appointed  for  the  retail  business  of 
A.  Adams,  retains  you  to  ascertain  the  approximate  percentage 
which  unsecured  creditors,  will  receive  on  their  claims.  From 
the  following  data,  you  are  asked  to  answer  your  client's  question 
and  also  to  prepare  the  proper  statement  and  the  proper  accom- 
panying account  as  preliminary  thereto : 

ASSETS 

Cash  on  Hand  $       500 

Cash  on  Deposit  : 2,000 

Accounts   Receivable  $  28,500 

Reserve  for  Bad  Debts 2,500 

26,000 

Notes  Receivable  Trade  15,000 

Notes  Receivable,  Gem  Co 60,000 

Bank  Stock— 200  shares  at  131  1-8 26,225 

Stock— Gem  Co 45;000 

Merchandise  Inventory  _ 20  000 

Land   25^000 

Buildings 175,000 

Less  Reserve  for  Depreciation 35,000 

140,000 

Machinery  and  Tools  187,500 

Less  Reserve  for  Depreciation 44,500 

143,000 

Automobile  Trucks  15,000 

Less  Reserve  for  Depreciation 12,500 

2,500 

Office  Furniture  nnd  Furnishings 4,000 

Less  Reserve  for  Depreciation 2,000 

2,000 

Unexpired  Insurance  375 

Accrued  Interest  on  Trade  Notes,  Etc 225 

Total  Assets $507,825 

LIABILITIES 

Notes   Payable  $  200,000 

Accounts  Payable 175,725 

Taxes   Accrued   1,500 

Wages  Accrued  275 

Accrued  Interest  on  Notes  Payable 12,000 

Mortgage  on  Land  and  Buildings 125.000 

Accrued  Interest  on  Mortgage  Loan 6,250 

Total  Liabilities  , $  520,750 

A.  Adams,  Investment  50,000 

A.  Adams,  Drawing,  Dr 62,925 

$  12,925 
The  following  appraisals  and  estimates  of  values  have  been  made : 

Land  $  30,000 

Buildings  135,000 

Machinery  and  Tools 85,000 

Auto  Trucks « 2,000 

Furniture  and  Furnishings 1,200 

Merchandise  Inventory  ^ 12,000 

Accounts  Receivable — Good  ^ 20,000 

Accounts  Receivable — Bad  „  2,000 

Accounts  Receivable — Doubtful  - _  6,500 

but  estimated  to  realize » 3,000 

The  following  additional  facts  should  be  taken  into  considera- 
tion: 

Trade  Notes  Receivable  and  Accrued  Interest  are  secured  by 
150  shares  of  an  industrial  stock  quoted  at  156. 

(Continued  on  next  page.) 


PRACTICAL  PROBLEMS,   GRADED,  SERIES  B 


Code  :    Electro —  ( Continued ) 

Cash  on  Hand  includes  an  I.  O.  U.  of  the  proprietor  for  $75 
and  a  salary  advance  ticket  to  the  cashier  of  $10. 

The  Bank  stock  is  quoted  at  150;  175  shares  of  this  stock  is 
pledged  to  secure  Notes  Payable  of  $20,000  with  accrued  interest 
of  $1,000. 

Accounts  Payable  to  the  extent  of  $5,725  are  secured  by  a 
chattel  mortgage  on  merchandise  of  $3,000. 

The  financial  statement  of  the  Gem  Co.  shows : 

Assets    !..  $  150,000 

Liabilities  » -...., 85,000 

Capital  Stock  Outstanding 50,000 

Surplus   15,000 

The  Assets  have  been  appraised  at 135,000 

Trade  notes  receivable  not  yet  due  have  been  discounted  at  the 
bank  to  the  amount  of  $5,000 ;  and  an  examination  of  these  dis- 
counted notes  shows  that  one  of  $1,000  will  be  dishonored. 


PRACTICAL  PROBLEMS,   GRADED,  SERIES  B 


Code :    Electrode 

The  Standard  Trust  Company  is  appointed  by  the  Peninsular 
Mining  Company  as  trustee  of  a  bond  issue,  aggregating  $1,- 
000,000.00,  all  bonds  of  $1,000.00  denomination,  rate  5%  and 
bearing  date  January  1,  1914.  Bonds  mature  in  ten  equal  annual 
installments,  beginning  January  1,  1917,  unless  previously  con- 
verted or  retired. 

The  issue  is  not  purchased  by  the  trustee,  but  is  sold  through 
Emory  Davis  &  Company,  Brokers,  the  company  realizing  90% 
and  accrued  interest  less  the  cost  of  appraisal  of  property,  print- 
ing, trustees'  expenses,  etc.,  amounting  to  $9,310.80. 

The  entire  issue  was  taken  over,  and  paid  for  by  the  brokers 
on  January  20,  1914. 

Among  other  things  the  trust  deed  provides  : 

Bonds  convertible  on  any  interest  date  for  6%   preferred 
stock  at  90%,  at  option  of  holder. 

Bonds  may  be  retired  out  of  surplus  on  any  interest  date  at 
103,  at  option  of  company. 

Sinking  fund,  for  payment  of  principal  only,  to  be  based  on 
production  of  ore  at  ten  cents  per  ton. 

Trustee  to  charge  14%  of  principal  on  issue,  and  14%  on 
coupons. 

Interest  payable  January  1st  and  July  1st. 

The  company's  production  for  three  years  is  assumed  to  be, 
for  the  purpose  of  this  problem,  1,000,000  tons  per  year. 

January   1,   1916— $100,000.00   are   converted   to  preferred 
stock. 

January  1,  1917— $200,000.00  are  redeemed  at  103. 

Formulate  all  necessary  entries  for  books  of : 

(a)  Standard  Trust  Company. 

(b)  Peninsular  Mining  Company. 

(c)  Emory  Davis  &  Company. 

which  may  be  occasioned  by  the  above  incidents  to  and  including 
January  1,  1917. 


PRACTICAL  PROBLEMS,  GRADED,  SERIES   B 


Code  :   Electrometer 

By  the  terms  of  an  agreement  entered  into  between  an  export 
agent  and  a  manufacturing  company,  the  agent  was  to  reimburse 
the  company  for  the  vakie  of  any  of  the  company's  product  de- 
stroyed through  causes  over  which  the  company  had  no  control. 
On  December  1,  1915,  the  storehouse  containing  all  the  company's 
product  was  mysteriously  destroyed  and  in  accordance  with  the 
contract  the  company  submitted  its  estimate  of  the  amcunt  due 
from  the  agent  as  $17,659.05.  The  agent  wished  to  verify  this  and 
obtained  the  following  data  from  the  company's  books : 

Commissions,  debit  balance,  $2,925.03;  insurance  $588.69; 
interest,  debit  balance,  $939 ;  interim  dividend  $4,794 ;  inventory, 
January  1,  1915,  $4,705.86;  labor  productive  $58,498.74;  legal 
expense  $52.50 ;  net  profits,  December  1,  1915,  $13,358.73 ;  pur- 
chases $166,247.46;  repairs  $48;  sales  $245,064.12;  sundry  fac- 
tory expense  $9,605.76 ;  surplus,  December  1,  1915,  $8,564.73 ; 
telephone  $1,248.18. 

Prepare  a  statement  showing  the  value  of  the  company's  prod- 
uct on  hand,  December  1,  1915: 


PRACTICAL  PROBLEMS/GRADED,  SERIES   B 


Code  :    Electromotor 

A  partnership  between  three  persons  had  run  for  three  years 
upon  the  following  capital  and  interest  in  profits : 

"A"    $9,000.00 3-8  Interest 

"B"      8,250.00 3  8  Interest 

"C"      2,000.00 1-4  Interest 

The  annual  profits,  which  had  been  credited  to  the  partners' 
personal  accounts,  were  as  follows: 

1908 $30,510.75 

1909 , 29,026.30 

1910 37,026.75 

Thereupon  '*C"  expressed  his  dissatisfaction  and  announced 
his  intention  of  dissolving  the  agreement  on  December  31,  1910, 
so  far  as  he  was  concerned,  unless  he  was  placed  in  the  same 
position  as  to  profits  as  "A"  and  "B,"  dating  back  to  the  opening 
of  the  agreement,  January  1,  1908. 

"A"  and  "B"  agree  to  this  provided  "C"  will  agree  to  a  trans- 
fer from  his  personal  account  of  a  sum  sufficient  to  equalize  the 
capital  accounts.  This  is  accepted  by  "C"  subject,  however,  to  the 
aggregate  stated  profits  being  revised  by  charging  "A's"  Capital 
Account  with  $2,250.00,  and  $1,500.00  against  "B's"  Capital  Ac- 
count, also  that  $1,250.00  be  charged  to  office  furniture. 

Assuming  the  books  to  have  been  closed  each  year  under  the 
original  terms  of  agreement,  draft  the  journal  entries  necessary 
to  adjust  the  accounts  and  show  the  relative  condition  of  the 
respective  capital  and  personal  accounts  at  the  opening  of  the 
new  partnership,  January  1,  1911. 


PRACTICAL  PROBLEMS,  QRADED,  SERIES  B 


Code :    Electroscope 

A  receiver  is  appointed  to  take  charge  of  the  Farm  Imple- 
ments Company,  on  June  1st,  1915,  and  employs  a  C.  P.  A.  to  de- 
termine from  the  books  the  exact  conditions  of  the  business.  He 
finds  the  books  to  show  the  following: 

Cash  on  hand  $         623.10    $ 

Cash  on  Deposit  at  Reserve  National  Bank 34,000.00 

Notes  Receivable  - 95,000.00 

Notes  Receivable   Discounted  650,000.00 

Notes  Receivable  Assigned  to  Bank 100,000.00 

Accounts  Receivable  : 40,058.40 

Accounts  Receivable  Assigned  to  Bank 50,000.00 

Reserved  for  Losses  on  Notes  and  Accounts 37,923.12 

Doubtful  Notes  and  Accounts 8,417.51 

Material  and  Supplies  239,516.75 

Branches,  Net  Advances  156,397.00 

Land,  Buildings  and  Equipment 705,742.34 

Reserve  for  Depreciation  Bldgs.  and  Equipment..  98,351.68 

Patterns,  Tools.  Etc 13,000.00 

Deferred  Charges  ^ „ 12,121.37 

Bills  Payable— Reserve  National  Bank 397,667.73 

Bills  Payable — Merchandise  45,033.43 

Bills  Payable— Equipment  Notes 40,000.00 

Accounts  Payable  67,152.98 

Accrued   Pay  Roll  5,000.00 

Accrued  Taxes  5,000.00 

Accrued  Interest  Bank  3,000.00 

Accrued  Interest  Sundry 2,340.20 

Accrued  Interest  Equipment  Notes 1,000.00 

Land  Contract 1,750.00 

Commission    Contingent    to   become   payable    to 

agents  when  customers'  notes  are  paid -  1,506.43 

Dealers'  Deposits  5,000.00 

Capital— Preferred  Stock  500,000.00 

Capital— Common  Stock 600,000.00 

Surplus    394,150.88 

Subscription  Account  (Common  Stock) 100,000.00 

$2,204,876.47    $2,204,876.47 


The  accountant  finds  that  the  Company  has  secured  its  line 
of  credit  at  the  Reserve  National  Bank,  on  filing  one  of  the  usual 
forms  of  statment  for  securing  credit  at  National  Banks.  The 
Real  Estate  has  been  appraised  at  $100,000.00  as  to  land,  and 
$100,000.00,  as  to  buildings  as  a  going  concern,  but  in  case  of 
liquidation  the  land  and  buildings  would  bring  only  $150,000.00. 
The  Machinery  and  Equipment  have  been  appraised  at  $400,000.00 
as  a  going  concern,  and  $50,000.00  on  liquidation.  The  Material 
and  Supplies  are  worth  $239,516.75  as  a  going  concern  and  $125,- 
000.00  on  liquidation,  except  that  on  a  further  investment  of 
$20,000.00  to  complete  the  manufacture  of  goods  in  process  they 
would  bring  $200,000.00. 

Examination  of  the  notes  and  accounts  receivable  discloses 
that  the  notes  will  show  a  shrinkage  of  $50,000.00  on  collection 
and  the  accounts  which  include  credit  balances  aggregating  $1,- 
250.62  will  show  $15,000.00  shrinkage.  Subscriptions  to  capital 
stock  are  considered  to  be  worth  60%  of  their  face  value.    Pat- 

( Continued  on  next  page.) 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  B 


Code  :    Electroscope —  ( Continued  ) 

terns.  Tools  and  Dies  are  worth  $10,000.00  as  a  going  concern, 
and  $1,000.00  on  liquidation.  Doubtful  notes  and  accounts  are 
considered  worth  50%.  Net  advances  to  branches  involve  the 
consideration  of  sale  of  finished  product,  collection  of  local  ac- 
counts, payment  of  accrued  salaries,  rent,  etc.,  to  net  $150,000.00 
as  a  going  concern,  and  $100,000.00  on  liquidation.  Deferred 
Charges  may  be  considered  worth  $1,000.00  on  liquidation.  Land 
Contract  represents  a  balance  due  on  principal  of  $3,000.00.  It  is 
estimated  that  the  receivership  fees,  including  special  allowance, 
will  amount  to  3%  of  the  unpledged  assets  if  sold  in  their  present 
condition,  or  5%  if  the  plant  is  operated  by  the  receiver. 

Prepare  a  Statement  of  Affairs  to  submit  to  the  creditors  as 
a  result  of  a  complete  audit,  showing  the  position  and  relation 
of  the  secured  and  unsecured  creditors  and  stockholders,  the 
book,  going  and  liquidating  values  in  comparison,  together  with 
a  Deficiency  Account. 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  B 

Code  :   Electrum 

A  syndicate  having  invested  in  a  coal  property,  presents  the 
following  balance  sheet : 

ASSETS 

Acreage  $1,500,000.00 

Physical  equipment  500,000.00 

LIABILITIES 

Capital  stock  $1,000,000.00 

Bonds,  1st  Mtg.,  5s 1,000,000.00 

The  syndicate  estimates  it  will  mine  and  sell  1,250,000  tons 
per  year,  and  the  life  of  the  mines  at  this  rate  will  be  25  years. 

The  surface  acreage  is  not  marketable. 

It  will  require  $50,000  expended  annually  in  additional  equip- 
ment. This  physical  equipment  will  carry  only  a  small  salvage 
value  at  the  expiration  of  25  years. 

The  bonds  are  to  be  called  at  the  rate  of  $40,000  per  annum. 

At  what  net  profit  per  ton  must  the  coal  be  sold,  so  that  a 
dividend  of  seven  per  cent,  can  be  paid  yearly  on  the  stock,  and 
leave  at  the  close  of  business  25  years  hence,  sufficient  convertible 
assets  to  pay  the  stockholders  in  cash,  the  par  value  of  their  stock? 
Explain. 

Make  a  statement  winding  up  the  syndicate's  aflFairs,  assum- 
ing the  general  correctness  of  the  estimates. 


PRACTICAL  PROBLEMS,  GRADED,  SERIES   B 


Code  :    Elegance 

George  R.  Street  is  engaged  in  the  real  estate,  loans  and 
insurance  business  as  a  sole  proprietor,  and  his  net  worth  is  up- 
wards of  $50,000.00.  He  enters  into  an  arrangement  with  H.  L. 
Ranney  and  John  Sterns  whereby  the  three  are  to  purchase  a  par- 
cel of  ground  and  erect  buildings  for  sale  or  rent. 

Contributions  of  capital  and  distributions  of  profits  are  to  be 
equal.  Record  the  following  transactions  on  the  books  of  Mr. 
Street : 

George  R.  Street  takes  title  to  100  feet  of  land  at  2233-35 
Fairfax  Avenue  from  Mr.  Henry  Proctor  for  a  consideration  of 
$5,000.00.     He  pays  Mr.  Proctor  $500.00  cash  and  gives  back  a 
mortgage  on  the  property  at  2233  for  $2,250.00  and  at  2235  for 
the  same  amount.    He  pays  $44.80  for  bringing  down  the  abstract 
and  for  recording  fees.     He  pays  $25.00  for  survey.     He  sells  a 
10-foot  strip  off  the  back  of  the  property  for  $650.00  cash.   Twin 
houses  are  erected  on  the  remaining  property  at  a  cost  of  $5,107.00 
each,  by  Mr.  John  Sterns.    A  mortgage  of  $4,000.00  is  executed 
by  the  three  partners  jointly  on  each  of  the  pieces  of  property, 
and  the  proceeds  are  turned  over  to  Sterns  in  part  payment  of 
his  contract  for  the  erection  of  the  houses.    The  mortgagee,  how- 
ever, deducts  $27.30  insurance  premium  on  the  two  houses  before 
turning   over   the   proceeds.      In    addition.    Street   pays    Sterns 
$1,000.00  in  cash. 

Sterns  renders  a  bill  for  a  garage  and  extras  on  the  property 
at  2235,  of  $679.77. 

Mrs.  Elsie  Hemple  purchases  the  property  at  2235  for  $9,- 
335.00  paying  $200  earnest  money. 

Ranney  and  Sterns  pay  $750.00  each  to  Street,  who  pays  oflF 
the  original  mortgage  of  $2,250.00  on  this  property.  Mrs.  Hemple 
then  assumes  the  $4,000.00  mortgage  on  the  property  including 
interest  amounting  to  $78.67,  and  gives  back  a  second  mortgage 
of  $3,800.00.  She  is  given  credit  for  $20.00  on  a  change  made  in 
a  radiator,  and  in  closing  the  deal  she  pays  a  further  sum  of  $1,- 
236.33  in  cash. 

Disregard  interest  on  joint  account  advances.  It  is  not  re- 
quired that  the  profit  on  the  property  should  be  calculated,  nor 
that  separate  accounts  should  be  opened  for  the  respective  pieces. 

After  recording  these  transactions  on  the  books  of  George  R. 
Street,  (1)  Draw  a  trial  balance  of  the  syndicate  transactions,  and 
(2)  Show  what  amount  should  be  paid  by  one  or  more  members 
of  the  joint  account  direct  to  others  to  equalize  their  respective  in- 
vestments. 


PRACTICAL  PROBLEMS,   GRADED,  SERIES  B 


Code:   Elegant 

Three  merchants,  "A,"  "B"  and  "C,"  decide  to  commence 
business  and  pay  in  as  capital  $25,000.00,  $15,000.00  and  $10,- 
000.00,  respectively.  Profits  or  losses  to  be  apportioned  corre- 
spondingly. At  the  end  of  the  first  year,  an  account  is  taken 
showing  a  profit  of  $7,500.00.  "A"  withdraws  from  the  firm,  and 
after  an  amount  is  agreed  upon  as  an  allowance  for  bad  debts,  viz., 
$1,250.00,  he  is  paid  oflF  in  cash,  and  "B"  and  "C"  take  over  the 
business  jointly. 

Draft  the  necessary  entries,  showing  the  closing  and  adjust- 
ments occasioned  by  the  change. 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  B 


Code  :    Elegy 

The  "A,  B  &  C"  Co.  operates  a  retail  store  with  two  depart- 
ments— "X"  and  "Y."  The  following  balances  appear  on  the 
books  of  the  company  before  closing : 

Accounts  receivable— All  good— "X" $  15,000.00        $ 

"Y" 6,125.00 

Accounts  payable  25,423.00 

Advanced  to  "B" 1,075.00 

Bad  debts  ("X"  $1,400.00  and  "Y"  $500.00) 1,900.00 

Barn  rent  and  expense 350.00 

Bank  loans  12,000.00 

Bills  receivable  -650.00 

Cash  on  hand „ 250.00 

Capital  stock  20,000.00 

Discount  on  purchases — "X" 15,500.00 

•T" 9,768.00 

Drivers'  wages  2,400.00 

Feed  640.00 

Furniture  and  fixtures 5,000.00 

First  National  Bank 2,496.00 

General  advertising  7,720.00 

Horses,  wagons,  etc 1,700.00 

Inventory— December  31,  1913— "X" 26,106.00 

"Y" 15,000.00 

Insurance  1,125.00 

Interest  and  discount  on  notes  payable 925.00 

Loan  from  "A" 7,000.00 

Office  and  general  expenses 1,200.00 

Purchases— "X" 224,300.00 

"Y" 99,600.00 

Rent  and  light 4,000.00 

Surplus  2,920.00 

Sales— "X" 243,800.00 

"Y" 106,500.00 

Salaries— Office  2,850.00 

Officers  10,000.00 

Salesmen— "X".-. 7,553.00 

"Y" 4,946.00 

$442,911.00       $442,911.00 

The  books  were  closed  on  the  basis  of  the  above  trial  bal- 
ance by  taking  up  the  inventory  of  merchandise  which  amounted 
to  $33,400.00  for  Department  "X"  and  $15,000.00  for  Department 
"Y." 

Prepare  a  draft  of  the  adjusting  entries  necessary  to  bring 
the  books  into  accord  with  the  adjusted  statements,  a  balance 
sheet,  and  a  departmental  statement  of  profits  based  on  the  fol- 
lowing information: 

Delivery  expenses  should  be  charged  equally  to  the  two  de- 
partments, and  general  expenses  %  to  "X"  and  Ys  to 

The  furniture  and  fixtures,  horses,  wagons,  etc.  were  taken 
up  on  the  books  at  the  appraisal  values  at  January  1, 
1914.  No  additions  were  made  during  the  year  except 
that  additional  fixtures  costing  $450.00  were  received  in 
December.  The  bill  for  these  fixtures  had  not  yet  been 
entered. 

(Continued  on  next  page.) 


PRACTICAL  PROBLEMS,   GRADED,  SERIES  B 


Code  :    Elegy —  ( Continued ) 

Depreciation  should  be  provided  at  the  rate  of  10%  of  the 
beginning  balance  of  the  furniture  and  fixtures  account 
and  at  20%  for  horses,  wagons,  etc. 

An  error  of  $350.00  was  discovered  in  the  final  inventory  of 
Department  "X,"  which  resulted  in  an  overstatement  of 
that  amount. 

The  unexpired  insurance  amounted  to  $225.00  at  December 
31,  1914,  and  $200.00  at  December  31,  1913. 

The  bank  loans  consisted  of  two  notes  for  $6,000.00  each. 
One  note  dated  October  1  and  due  in  four  months  bore 
interest  at  6%  and  the  other  dated  November  1  and  due 
in  four  months  was  a  non-interest  bearing  note  which 
had  been  discounted  at  5%.  There  were  no  bank  loans 
outstanding  at  the  beginning  of  the  year. 

Accrued  taxes  have  never  been  taken  up.  The  amount  ac- 
crued is  estimated  to  be  the  same  as  it  was  a  year  ago» 
i.e.  $300.00. 


PRACTICAL  PROBLEMS,  GRADED,  SERIES   B 


Code  :    Element 

In  1895,  the  Chicago  Mfg.  Company  purchase  real  estate 
costing  $12,000,  erect  a  building  for  $30,000,  and  purchase  ma- 
chinery costing  $25,000.  No  further  purchases  are  made  and  on 
January  1,  1905,  a  balance  sheet  of  the  Company  discloses  the 
following  condition : 


Real   Estate  $  12,000 

Buildings    30,000 

Machinery    25,000 

Merchandise    Inventory    60,000 

Accounts   Receivable   75,000 

Cash    10,000 


Liabilities 

Capital    Stock   $  150,000 

Surplus  23,500 

Reserve  for  Depreciation: 

On  Buildings  7,500 

On  Machinery  16,000 

Accounts  Payable  16,000 


$    212,000 


$    212,000 


On  May  IG,  1905,  their  factory  is  burned,  a  total  loss 
ensuing.  Their  books  of  account  as  on  that  date  show  the  follow- 
ing ledger  balances : 


Debit  Balances 

Real   Estate  $  12,000 

Buildings    30,000 

Machinery    25,000 

Merchandise  inventory,  Jan.  1, 

1905  60,000 

Purchases     150,000 

Labor  and  other  factory  cost..  60,000 

General  expenses  45,000 

Accounts  receivable  73,000 

Cash    32,000 


Credit  Balances 

Capital    Stock   $  150,000 

Surplus  23,500 

Reserve  for  depreciation: 

On    Buildings   7,500 

On  Machinery  15,000 

Sales  (net)  280,000 

Accounts   payable 11,000 


$    487,000 


$    487,000 


For  the  years  1902,  1903  and  1904  their  books  showed  a 
gross  profit  on  manufacturing  averaging  25  per  cent  of  the  net 
sales.  The  company,  however,  succeeds  in  obtaining  only  $55,000 
from  the  Fire  Insurance  Companies  for  merchandise  lost. 

In  respect  to  the  buildings  and  machinery,  the  companies  ac- 
knowledge that  the  cost  of  replacing  same  would  be  10  per  cent 
higher  in  1905  than  in  1895  and  after  taking  this  fact  into  con- 
sideration and  determining  what  they  consider  fair  depreciation, 
they  settle  these  two  items  as  follows:  Building  $28,000,  ma- 
chinery $17,500.  The  company  erects  a  new  building  costing 
$40,000  and  purchases  machinery  costing  $35,000  and,  finding 
that  the  value  of  its  real  estate  is  now  $24,000,  it  makes  a  book 
entry  to  so  record  it. 

Prepare  cash  book  and  journal  entries  to  properly  record  all 
of  the  above  transactions,  losses  or  gains *due  to  fire,  actual  trad- 
ing profit  from  Jan.  1,  1905,  to  date  of  fire  and  balance  sheet  after 
making  all  of  the  above  entries.  For  the  purposes  of  this  question, 
assume  no  accounts  receivable  collected  or  accounts  payable  paid. 

For  class  uniformity,  provide  depreciation  for  partial  year  as 
follows:   Buildings  2^2%,  Machinery  6%. 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  B 

Code  :    Elephant 

A  branch  office  business  was  started  the  first  of  the  year,  the 
head  office  advancing  $5,000.00  cash.  During  the  first  year  mer- 
chandise was  shipped  to  branch,  invoiced  at  $75,000.00. 

An  auditor  checking  up  the  business  at  the  close  of  the  year, 
finds  the  following: 

Merchandise  sales  were  $60,000.00,  with  selling  price  of  goods 
20%  advance  on  invoice. 

Proper  vouchers  were  on  file  duly  receipted  for  the  following 
payments : 

Rebates  and  allowances  on  damaged  goods $  1,500.00 

Salaries  and  other  expenses 4,500.00 

Freights 2,500.00 

The  books  also  showed : 

Remittances  to  head  office $35,000.00 

Uncollected  accounts 15,000.00 

The  balance  of  the  sales  were  realized  in  cash,  less  rebates  and 
allowances  as  noted. 

The  cash  on  hand,  and  inventory  of  unsold  goods,  together 
with  the  foregoing  records,  properly  account  for  everything. 

Prepare  a  statement,  such  as  an  auditor  would  make  in  report- 
ing to  the  head  office,  balancing  the  business  of  the  branch  house. 


PRACTICAL  PROBLEMS,    GRADED,  SERIES  B 


Code  :    Elevate 

The  trial  balance  of  the  American  Mfg.  Co.,  as  at  Decem- 
ber 31,  1906,  before  closing  the  books  for  the  year  is  given  below 
In  addition  to  the  information  obtainable  from  the  trial  balance, 
the  following  data  must  be  taken  into  consideration  in  closing  the 
books : 

Inventory  of  merchandise  at  Dec.  31,  1906,  $90,000. 

Inventory  of  tools  at  Dec.  31,  1906,  $4,500. 

Inventory  of  patterns  at  Dec.  31,  1906,  $4,000. 

Depreciation  on  buildings  at  rate  of  2%  per  cent. 

Depreciation  on  machinery  at  rate  of  10  per  cent. 

Depreciation  on  patents  at  rate  of  6  per  cent. 

Depreciation  on  office  furniture  and  fixtures  at  rate  of  10  per  cent. 

Half  of  1  per  cent  of  the  net  sales  is  charged  each  year  to  profit  and 
loss  and  credited  to  reserve  for  bad  debts. 

As  this  company  owns  its  own  plant,  it  is  its  custom  to  treat  its 
investment  in  real  estate  and  buildings  as  a  separate  investment  from 
which  it  expects  to  receive  5  per  cent  and  to  charge  the  cost  of  maintain- 
ing same,  plus  interest  on  investment,  to  the  cost  of  manufacture  as  rent. 

Prepare  closing  journal  entries  and  prepare  following  state- 
ments : 

Balance  sheet  as  at  January  1,  1907. 
Real  estate  operating  account.. 
Profit  and  loss  account  showing — 

(I)  Cost  of  manufacturing  and  gross  profit. 

(II)  Cost  of  selling,  administration,  and  net  profit. 

(III)  Surplus  account. 

Insurance  unexpired,  and  accrued  accounts  need  not  be  con- 
sidered in  this  question. 


PRACTICAL  PROBLEMS,   GRADED,  SERIES  B 


Code  :    Elevate —  ( Continued ) 

TRIAL  BALANCE  AS  AT  DECEMBER  31,  1906 

Merchandise  sales  account $ 

Real  estate  25,000 

Buildings  50,000 

Machinery    40,000 

Tools   7,000 

Patents 25,000 

Patterns  5,000 

Merchandise  purchase  account 420,000 

Bills  receivable  - 1,500 

Accounts  receivable  250,000 

Insurance  on  buildings  300 

Insurance  on  machinery,  tools  and  patterns 500 

Insurance  on  merchandise 650 

Taxes,  real  estate 1,500 

Interest,  general  7,000 

Bond  interest  2,500 

Cash  - 45,000 

Labor,   productive   310,000 

Labor,  unproductive  55,000 

Power 21,000 

Repairs  to  building 950 

Repairs  to  machinery  1,310 

Factory  expenses  3,010 

Employers*  liability  4,000 

Office  pay  roll  18,000 

Inventory  merchandise  January  1,  1906 75,000 

Return  sales  account 41,000 

Allowances  10,900 

Office  furniture  and  fixtures  5,700 

Salaries  to  officers 15,000 

Postage   2,000 

Telegrams  and  telephones  1,800 

Taxes,  personal  property 1,000 

Collection  and  exchange  700 

Stationery  and  printing  3,050 

Freight  in  ..-". —  23,000 

Freight  out 11,000 

Cartage  and  express  - 3,750 

Bonding  of  employes  (office) 250 

Traveling  expense,  salesmen 17,500 

Salesmen's  commissions  and  salaries  ~ 40,000 

Bad  debts  7,400 

Bond  account 

Bills  payable • 

Accounts  payable  ~ 

Surplus    

Capital  Stock  ...-.- 

Reserves  to  provide  for  depreciation  on — 

Buildings  

Machinery    

Patents    — 

Office  furniture  and  fixtures - 

Bad  debts  — 


$  1,090,500 


40,000 

100,000 

43,000 

39,020 

200,000 

5,250 

12,500 

7,500 

2,500 

13,000 


$  1,553,270    $  1,553,270 


PRACTICAL  PROBLEMS,   GRADED,  SERIES  B 


Code  :    Elevation 

On  January  1,  1900,  "A"  purchases  the  plant  and  business  of 
'B"  for  $400,000,  payable  $100,000  cash;  $150,000  January  1, 
1901;  $150,000  January  1,  1902,  with  interest  on  deferred  pay- 
ments at  G  per  cent.  None  of  the  book  accounts  or  stock  of  fin- 
ished goods  on  hand  January  1,  1900,  is  included  in  the  sale,  but 
is  specifically  reserved  by  "B."  Of  such,  the  Accounts  Receivable 
are  $28,500  and  finished  goods,  per  inventory,  $45,000.  The  agree- 
ment further  stipulates  that  "B"  shall  operate  the  plant  during 
the  year  1900  ?.nd  shall  be  reimbursed  on  January  1,  1901,  for  all 
1  '.nds  advanced  for  supplies,  expense,  labor  or  any  other  purpose 
in  connection  with  the  operation  of  the  business  during  1900,  as 
shown  by  "B's"  books.  Such  advances  to  be  computed  monthly 
and  to  bear  interest  from  the  last  day  of  each  month  at  6  per  cent 
per  ann..m  to  January  1,  1901.  The  profits  of  the  business  ror 
the  year  1900  belong  to  ''A." 

On  December  31,  1900,  ''B"  reports  that  inventory  of  finished 
goods  on  hand  is  $48,5u0.  Expenses  have  been  $284,000  and 
sa'es  $350,000. 

Condensed  particulars  of  transactions  are  as  follows : 

January  .....?  15,000 

February 10,000 

March  5.000 

April   5,000 

May  .    5,000 

June  5,000 

Ju'.y     100,000 

August 80.000 

S  ptember    75.U00 

October    25,000 

Novcmbek    15,000 

D.cembei  10,000 


Cash 

Cash 

Interest 

Collections 

Advances 

Due"B" 

$  10,000 

$  10,000 

$  550.00 

15.000 

25,000 

1,250.00 

10,000 

12,000 

540.00 

15,000 

32,000 

1,280.01. 

5.500 

35,000 

1,225.00 

18,000 

25,000 

750.00 

55,000 

30,000 

750.00 

75,000 

25,000 

500.00 

55,000 

30,000 

450.00 

45,000 

30,000 

300.00 

50,000 

15,000 

75.00 

19,000 

15.000 

$350,000       $372,500       $284,000       $7,670.00 

''B"*  presents  the  following  statement  to  "A"  on  January  1, 

1901,  and  fcv^^ests  .settlement: 

Sale  of  plant  and  business  as  per  contract $400,000 

Less  cish  paid  by      \"  January  1,  1900 100,000 


$300,000 

Interest  6  per  c*^iit  1  vear 18,000 

Advanced  bv  "B"  monthly 284|000 

Intertot   on   advances   7,670 


Sales 


$609,670 
.  350,000 


Balance  due  "B"  $259679 

Jf  which  $150,000  deferred  to  Jan.  1,  1902 150^000 


Due  January  1,  1901 $109,670 

"A"  is  not  satished  with  the  statement  and  employs  Certified 
Public  Accountants  to  investigate  and  report  another  basis  of 
settlement.  It  is  found  that  the  Accounts  Receivable,  December 
31,  1900,  are  $6,000,  and  '*B"  has  taken  these,  as  well  as  the  fin- 
ished goods  remaining  on  hand  ($48,500)  and  claims  both  items 
belong  to  him.    There  are  no  liabilities. 

Make  a  statement  for  "A,"  as  requested,  using  your  own 
methods. 


PRACTICAL  PROBLEMS,   GRADED,  SERIES  B 


Code  :    Elevator 

By  the  partnership  deed  of  a  -Taanufacturing  firm  consisting 
of  four  members,  "A,"  "B,  "C'  and  "D,"  it  was  provided  that  in 
the  event  of  the  death  of  any  partner  before  the  expiration  of  the 
partnership  by  eflFluxion  cf  time  on  December  31st,  1911,  there 
should  be  paid  to  the  legal  representatives  of  ihe  deceased  the 
amount  appearing  to  his  credit  on  December  31st,  next  preceding 
the  death,  together  with  interest  thereon  at  5  per  cent  per  annum 
to  December  31st  following  the  decease  and  a  share  of  the  profits 
of  the  year  of  his  decease  corresponding  to  the  number  of  days 
that  he  liv*id  during  it,  calculated  after  the  rate  of  the  average  of 
his  share  for  the  last  three  completed  years,  together  with  interest 
on  such  share  from  the  date  of  death  to  the  end  of  the  year. 

The  four  partners  shared  profits  equally  and  each  took  inter- 
est on  his  capital  at  5  per  cent  per  annum,  but  no  interest  was 
charged  on  the  drawings,  for  each  drew  at  the  end  of  every 
month  an  equal  sum  in  anticipation  of  profits. 

The  surviving  partners  were  to  share  the  profits  equally. 

"C"  died  on  June  30th,  1905.  The  profits  of  the  three  im- 
mediately preceding  years  had  been  respectively  $70,000.00,  $78,- 
000.00  and  $63,500.00. 

With  the  aid  of  the  followmg  Trial  Balance,  of  December 
31st,  1905,  taken  out  before  interest,  depreciation,  and  an  amount 
in  lieu  of  factory  rent  have  been  charged,  prepare  Manufacturing 
and  Profit  and  Loss  Accounts  for  1905,  showing  the  various  items 
in  their  proper  divisions,  and  allowing  $2,500.00  for  depreciation 
of  plant  and  machinery  and  of  office  furniture  and  fixtures  (15% 
and  10%  respectively)  and  5  per  cent  on  the  amount  of  the  real 
estate  (as  appearing  in  the  Trial  Balance)  for  factory  rent.  Also 
construct  a  Balance  Sheet  showing  what  was  due  to  the  deceased's 
estate  and  what  capital  stood  on  the  credit  of  each  of  the  surviving 
partners. 

The  inventory  at  December  31st,  1905,  was  $125,000.00.  Bills 
Receivable  to  the  amount  of  $1,000.00  falling  due  after  Decem- 
ber 31st,  1905,  had  been  discounted. 


PRACTICAL  PROBLEMS,    GRADED,   SERIES  B 


Code  :    Elevator —  ( Continued ) 

TRIAL  BALANCE.  DECEMBER  31,  1905. 

"A,"  Capital  Account $ 

"B,"  Capital  Account 

"C,"  Capital  Account 

"D,"  Capital  Account 

"A,"   Drawing   Account 12,000.00 

"B,"   Drawing   Account 12,000.00 

"C,"   Drawing   Account 5,000.00 

"D,"   Drawing  Account 12,000.00 

Inventory,  December  31st,  1904 100,000.00 

Purchases  during  the  year  after  crediting  returns  1,775,000.00 

Factory  Wages  and  Salaries 250,000.00 

Balance  of  Discounts  Received,  and  Allowed 

Sales  during  the  year,  after  debiting  returns 

Cash  in  Hand  and  at  Bank 29,500.00 

Bad  Debts  16,000.00 

Bills  Receivable  15,000.00 

Office  Salaries  9,000.00 

General  Office  Expense  2,500.00 

Accounts  Receivable  414,000.00 

Traveling  Expenses  i 10,000.00 

Taxes,  Factory  1,000.00 

Rent  and  Taxes,  Office _ 2,000.00 

Real  Estate „ - 60,000.00 

Plant  and  Machinery  15,000.00 

Office  Furniture  and  Fixtures  2,500.00 

Bills  Payable  

Accounts  Payable  

Interest  and  Bank  Discount,  paid 7,500.00 


$    120,000.00 

110,000.00 

100,000.00 

90,000.00 


20,000.00 
2,110,000.00 


50,000.00 
150,000.00 


$2,750,000.00    $2,750,000.00 


PRACTICAL  PROBLEMS,   GRADED,   SERIES  B 


Code  :    Eleven 

Two  merchants,  C.  F.  Munton  and  W.  A.  Spencer,  agree  to 
^hare  equally  in  a  joint  adventure  in  trade  to  the  West  Indies. 

On  March  1st,  1907,  they  charter  a  small  vessel  and  purchase 
ship  materials  which  cost  them  $197.00,  for  which  Munton  gives 
his  r^heck. 

This  cargo,  they  consign  to  John  Smith,  their  agent  at 
Havana,  which  he  disposes  of,  a^d  in  return  ships  on  board  the 
same  vessel  4,000  cases  of  Comm-  dity  "A"  and  100  cases  of  Com- 
modity "B" ;  and  he  draws  on  Muntun  at  sight  for  $125.00,  this 
being  the  amount  of  the  agent's  charges  and  disbursements  over 
and  above  the  net  proceeds  of  the  cargo  consigned  to  him.  Mun- 
ton accepts  v.u\  pays  the  bill.  On  April  1st,  the  vessel  arrives, 
whereu'^on  Munton  pays  sundry  charges  of  $337.50.  Spencer 
pays  the  freight  amounting  to  $493.00.  On  April  4th,  Munton 
sells  1,000  cases  of  Commodity  "A"  to  Henry  Chamberlain  for 
$239.58,  and  collects  $150.00,  and  on  April  10th  S^',.icer  collects 
the  rest. 

About  this  time,  Mr.  Spenrer  happens  to  have  occasion  for 
1,400  cases  of  Commodity  "A,"  which  he  takes  on  April  14th,  and 
with  Munton's  consent  values  at  $291.66.  He  also  takes  10  cases 
of  Commodity  ''B,"  valued  at  $47.50.  Munton  sells  the  other 
1,600  cases  of  Commodity  *'A"  on  April  20th  to  John  Walters  for 
$383.33,  and  a  month  after  accepts  $382.50  in  full  payment. 

Mr.  Munton  next  sells  on  April  25th  the  other  90  cases  of 
Commodity  ''B"  in  barttr  for  30  cases  of  Comn^odity  "C,"  which 
he  and  Spencer  divide  equally  between  them  on  the  basis  of 
$4.75  per  case  for  Commodity  "B." 

The  goods  being  thus  dirposed  of,  Munton  presents  his  bill 
of  charges,  which  comes  to  $22.66,  and  desires  to  have  accounts 
stated  between  Mr.  Spencer  and  him. 

You  are  required  to  give  the  ledger  accounts  of  the  joint 
adventure. 


PRACTICAL  PROBLEMS,   GRADED,  SERIES  B 


Code  :   Elf 

A  cloak  manufacturing  concern,  turning  out  but  one  grade  of 
cloaks,  claims  to  have  been  robbed  on  the  night  of  April  16  and 
forthwith  files  a  claim  under  a  Burglary  Insurance  Policy  it  was 
carrying. 

The  proof  of  the  loss  filed  by  the  assured  contained  two  items, 
viz.— 300  cloaks  valued  at  $12,000.00  and  1,000  yards  of  silk  stated 
to  be  worth  $1,500.00. 

The  insurance  company  being  notified  of  the  loss,  immedi- 
ately ordered  an  inventory  to  be  taken,  which  was  done  on  the 
morning  of  the  17th  and  disclosed  the  following: 

1,250  Cloaks 

6,250  Yards  of  Cloth 

2,500  Yards  of  Silk 

On  the  same  day  you  were  called  in  by  the  insurance  com- 
pany to  examine  the  books  for  the  purpose  of  proving  or  disprov- 
ing the  claim,  when  the  following  information  was  obtained : 

First — That  a  complete  inventory  had  been  taken  on  January 
1,  1913,  of  the  cloaks,  cloth  and  silk  on  hand  at  that  date,  the  in- 
ventory sheets  of  which  had  subsequently  been  lost  or  destroyed. 
However,  the  books  showed  that  the  total  valuation  was  $32,- 
675.00  and  the  firm's  representatives  assured  you  that  this  was 
correct  and  that  the  inventory  had  been  properly  valued  at  cost 
prices  which  had  not  fluctuated  since. 

Second — That  the  cloth  and  silk  purchases  subsequent  to 
January,  1913,  had  amounted  to  18,750  yards  of  cloth  and  5,000 
yards  of  silk  at  average  prices  of  50c  and  $1.00  per  yard  of  each 
fabric  respectively. 

Third^That  3,000  cloaks  had  been  manufactured  during  the 
same  period  which  had  consumed  20,000  yards  of  cloth  and  5,000 
yards  of  silk,  while  4,500  cloaks  had  been  sold. 

You  were  further  informed  that  the  manufacturing  cost  was 
as  follows: 

Material   $5.00  per  Garment 

Labor  and  other  Expenses 3.50  per  Garment 

Give  the  gist  of  your  report  to  your  client ;  and  state  what, 
if  any,  diflFerent  case  you  could  have  made  out  for  the  Firm  had 
you  been  employed  by  it  instead  of  by  the  Insurance  Company. 


PRACTICAL  PROBLEMS,   GRADED,  SERIES  B 


Code  :    Elfin 

"A"  and  "B"  purchased  land  in  Porto  Rico  on  January  1st, 

1909,  and  started  a  tobacco  plantation,  the  former  bringing  in 
$100,000.00,  and  the  latter  $50,000.00  capital  in  cash.  Five  per 
cent  per  annum  is  paid  upon  capital,  while  the  net  profits  or  losses 
are  divided  equally.  They  draw  as  partnership  salaries,  $1,250.00 
a  year  each  and  make  no  other  withdrawls. 

In  the  first  year,  they  spend  $75,000.00  for  the  purchase  of  and 
payment  for  the  land,  buildings,  etc.,  and  $15,000.00  in  planting 
the  1910  crop,  which  was  sold  in  1910  for  $40,000.00,  but  upon 
which  had  been  paid  in  1910  and  up  to  the  date  of  the  sale  $2,- 
500.00  for  wages  and  sundry  expenses. 

In  1910  they  spent  $25,000.00  in  further  developing  the  estate 
and  $40,000.00  in  planting  the  1911  crop. 

Draw  a  Balance  Sheet  as  at  the  end  of  each  year,  1909  and 

1910,  and  in  the  Partners*  Capital  Accounts  therein  show  the 
condition  consequent  on  results,  there  being  no  other  assets  or 
liabilities  than  these  mentioned  above,  and  the  bankers'  debit  and 
credit  balance,  as  the  case  may  be. 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  B 


Code  :   Elict 

A  Partnership  existing  between  "A"  and  "B"  expired  by 
effluxion  of  time,  and  "A"  being  the  senior  member,,  decided  to 
withdraw  altogether  in  favor  of  his  son  **C"  who,  for  some  years 
had  been  connected  with  the  firm.  This  "B"  agreed  to  on  the 
understanding  that  he  should  assume  the  senior  position  and  take 
the  larger  share  of  profits  which  "A"  up  to  that  time  had  enjoyed, 
while  "C,"  in  turn,  should  take  the  place  of  "B."  A  new  part- 
nership on  these  lines  was  entered  into,  it  being  further  agreed 
that  for  the  purpose  of  the  adjustment  of  the  partners'  accounts, 
inter  se,  the  goodwill  of  the  business  should  bt  valued  on  the 
basis  of  five  years'  purchase  of  the  average  profits  for  the  last 
three  years,  after  allowing  "B"  a  salary  for  having  taken  the  active 
part  in  managing  the  business  during  this  period,  of  $5,000.00  per 
annum.  As  between  *'A"  and  "C"  it  was  also  agreed  that  "A" 
would  loan  "C"  the  necessary  funds  for  the  new  partnership, 
while  "B"  met  his  obligaticiis  in  cash  on  the  morning  of  January 
1,  1913. 

From  the  foregoing  and  the  following  data,  prepare — 

First — A  Balance  Sheet  of  the  old  Partnership  as  at  Decem- 
ber 31,  1912,  with  relative  Statement  of  Profits  for  the 
year  ending  on  that  date,  showing  sales,  cost  of  sales,  and 
gross  and  net  profits,  etc.,  supplemented  with  statement 
showing  how  '*Cost  of  Sales"  is  arrived  at. 

Second — Prepare  statements  of  the  partners'  accounts,  giving 
effect  to  the  retirement  of  "A"  from  the  firm  and  the 
admission  of  "C,"  and  to  the  change  in  the  status  of  "B." 

Third — Show  the  Balance  Sheet  of  the  new  partnership  at 
January  1,  1913,  after  "B"  had  met  his  obligations. 

Assume  (1)  That  in  the  old  partnership  "A"  had  a  %-in- 
terest  and  "B"  1/3 ;  (2)  that  the  net  profits  for  the  years  1910  and 
1911  as  originally  arrived  at  and  passed  to  the  credit  of  the  part- 
ners' accounts  were  $30,000.00  and  $40,000.00,  respectively;  (3) 
that  interest  is  to  be  received  on  the  capital  accounts  at  the  rate 
of  5%  per  annum;  and  (4)  that  depreciation  should  be  written 
off  the  properties  at  the  rate  of  6%  per  annum. 


PRACTICAL  PROBLEMS,   GRADED,  SERIES  B 


Code:    Elict — (Continued) 

TRIAL  BALANCE  OF  "A"  AND  "B"— AT  DECEMBER  31,  1912 

Dr.  Cr. 

Cash  $  50,000.00       $ 

Accounts    receivable 100,000.00 

Accounts  payable 101 ,000.00 

Sales  500,000.00 

Inventories  of  raw  materials  at  Jan.  1,  1912 97,500.00 

Inventories  of  operating  supplies,  Jan.  1,  1912 15,000.00 

Inventories  of  finished  stock,  Jan.  1,  1912 67,500.00 

Raw  material  purchases 140,000.00 

Productive  labor 105,000.00 

Power,  heat  and  light  expenses  and  taxes 40,000.00 

Other  operating  expenses  and  supplies  purchased..     18,000.00 

Property  account '. 125,000.00 

"A's"  capital  account 200,000.00 

"B's"  capital  account 100,000.00 

"A's"  drawings  12,000.00 

"B's"  drawings  6,000.00 

Selling  expenses  85,000.00 

General  and  administration  expenses 40,000.00 

$901,000.00       $901,000.00 


The  inventories  at  December  31,  1912,  were  as  follows: 

Raw  material  $100,000.00 

Finished  stock  75,000.00 

Operating  supplies  17,500.00 

Taxes  accured  and  not  taken  up  amounted  to 2,500.00 

Payrolls  accrued  and  not  taken  up  amounted  to 7,500.00 

Insurance  premiums  prepaid.. _ 3.000.00 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  B 


Code  :   Eligible 

Adam  Smith  and  Thomas  Gray  have  been  in  business  as  con- 
tractors for  the  last  six  years.  Each  invested  $63,000  cash  and 
was  to  receive  one-half  of  the  gain  and  bear  one-half  of  the  losses, 
which  were  as  follows  for  the  entire  period : 

Year  1899,  Gain T. $15,000.00 

1900,  Gain 18.000.00 

1901,  Gain - 21,852.00 

1902,  Gain 1,500.00 

1903,  Loss 1.500.00 

1904,  Loss 3,000.00 

Each  withdrew  from  the  business  for  priva'^e  use  $6,000  per 
year.'  On  December  31,  1904,  an  assignment  was  made  and  the 
assignee  obtained  the  following  information  in  addition  to  that 
already  given,  from  which  he  proceeded  to  make  a  Statement  of 
AflFairs  and  a  Deficiency  Account  to  be  placed  before  the  cred- 
itors : 

Unsecured  Creditors  on  open  account $  27,000.00 

Fully  secured  Creditors  6,900.00 

Securities  held  by  above  consist  of  patents,  valued  at      9,000.00 

Partly  secured  Creditors 105,000.00 

Securities  held  by  above  consist  of  railway  shares, 

valued  at  60,000.00 

Wages  due  2,000.00 

Rent  due  400.00 

Bills  Payable 60,000.00 

Book  Debts  (Good)  3,000.00 

Book  Debts  (Doubtful),  (Est.  worth  $225.00) 800.00 

Book  Debts  (Bad),  of  no  value 900.00 

Stock  in  Trade 112,500.00 

Above  is  estimated  worth 66,600.00 

Plant  and  machinery  cost 120,000.00 

Above  estimated  to  produce 60,000.00 

•      Office  Furniture,  $900,  estimated  worth 600.00 

Bills  Receivable  under  Discount  10,000.00 

Estimated  Liability  of  Estate  on  above :. 4,000.00 

Cash  in  Bank  252.00 

From  the  facts  given  above  prepare : 

(a)  A  Statement  of  Affairs. 

(b)  A  Deficiency  Account. 


PRACTICAL   PROBLEMS,   GRADED,  SERIES  B 


Code:    Eliminate 

On  January  1,  1915,  "A,"  "B,"  "C,"  and  "D"  held  shares  in 
the  Bright  Gold  Mining  Company,  as  follows : 

"A"  5,000  shares;  "B"  4,000  shares;  "C"  3,000  shares;  ^'D" 
2,000  shares.  These  shares  were  purchased  by  the  parties  men- 
tioned as  individuals  for  $5.00  each,  which  was  their  par  value. 

It  was  decided  by  "A,"  "B,"  "C"  and  "D"  that  they  should 
purchase  for  joint  account  6,000  shares  of  the  above  company  at 
the  market  price  of  $10.00  per  share.  This  purchase  was  made  on 
March  30,  1915,  the  parties  being  interested  in  the  purchase 
equally.  The  money  was  obtained  from  the  Good  Friend  Banking 
Company,  all  the  shares  held  being  given  as  security  for  the  loan. 
At  this  point  an  arrangement  was  made  to  pool  the  shares,  each 
party  becoming  interested  in  the  adventure  in  accordance  with 
the  shares  originally  held  and  the  purchase  made  on  joint  account. 

On  April  15,  1915,  the  Bright  Gold  Mining  Company  issued 
new  capital,  one  share  being  allotted  for  every  five  held.  The 
shares  were  issued  at  a  premium  of  $1.00  per  share.  The  pool 
borrowed  money  from  the  bank  and  on  April  18,  1915,  took  up 
the  shares,  depositing  them  with  the  bank.  Owing  to  a  boom 
on  the  gold  mining  market,  the  shares  rose  rapidly  and  were 
partially  sold  as  follows : 

10,000  shares  @  $20.00  per  share  for  settlement  June  30,  1915. 
3,000  shares  @  $18.50  per  share  for  settlement  July  2,  1915. 
3,000  shares  @  $15.75  per  share  for  settlepient  July  3,  1915. 
4,000  shares  @  $15.00  per  share  for  settlement  July  10,  1915. 

As  the  proceeds  of  the  various  sales  were  obtained  on  the 
dates  mentioned,  the  bank  was  paid  off  with  interest  at  8%,  and 
any  surplus  paid  into  a  current  account  with  the  bank. 

On  July  31,  it  was  decided  to  break  the  pool  and  that  each 
party  would  receive  his  share  of  the  stock  unsold  and  the  pro- 
portion of  the  cash  in  bank  due  to  him. 

From  the  above  information,  prepare  a  detailed  statement 
bringing  out  the  result  of  the  above  transactions,  and  a  further 
statement  showing  in  detail  the  division  of  the  cash  in  bank  and 
shares  unsold  between  the  adventurers. 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  B 


Code  :    Elison 

The  "A"  "B"  ''C"  Estate  Company  was  formed  on  January  1, 

1912,  and  the  following  is  the  trial  balance  as  at  December  31, 

1913,  before  closing  the  income  and  expenditure  accounts   for 
the  current  year: 

THE  A.  B.  C.  ESTATE  COMPANY 
TRIAL  BALANCE  DECEMBER  31,  1913 

Dr.  Cr. 

Capital  stock  authorized  and  issued $  $140,000.00 

Bonds  issued — 

120,000  20-year  5%  bonds  issued  Jan. 

1,  '12,  at  a  discount  of  5% 120,000.00 

Discount  on  bonds  issued 6,000.00 

Property   (Jan.   1,  1913) 250,280.50 

Capital  stock  in  treasury 12,000.00 

Calls  unpaid  500.00 

Additions  to  property  1913 — 

Sinking  artesian  well 5,000.00 

"A."  "B."  "C"  Estate  Co.— 

Bonds    purchased     1912     (and    can- 
celled)    $6,000.00         5,850.00 

Bonds  purchased  1913 6,000.00         5,750.00 

Rents  collected  24,500.00 

Fire  insurance  paid  to  June  30,  1914 300.00 

Agents'  fees  and  expenses 2,850.00 

General  office  expenses 1,050.00 

Cash  at  bankers  and  on  hand .  1,389.50 

Secretary's  salary  and  commission 2,380.00 

Income  and  expenditure  account  1912 14,250.00 

Interest  on  bonds   (paid  annually) 5,400.00 

$298,750.00    $298,750.00 


The  rent  collections  include  rents  paid  in  advance — ^$750.00 
and  there  are  sundry  rents  outstanding  not  taken  up  on  the  books, 
amounting  to  $2,050.00  of  which  it  is  estimated  $15.00  will  not 
be  collected. 

No  provision  has  been  made  in  the  year's  accounts  for  de- 
preciation of  the  buildings,  included  in  the  property  account,  the 
original  co.st  of  which  was  $120,000.00.  In  the  year  1912  the 
amount  written  off  was  based  on  an  estimated  life  of  20  years. 

Prepare  Balance  Sheet  as  at  December  31,  1913,  and  Income 
and  Expenditure  Account  for  the  year  ended  that  date,  after 
making  the  necessary  adjustments. 


PRACTICAL  PROBLEMS,   GRADED,  SERIES  B 


Code  :    Elite 

A  company  is  formed  at  January  1st,  1907,  with  a  capital 
of  $1,750,000.00,  consisting  of  17,500  shares  of  the  par  value  of 
$100.00  each. 

Of  these,  16,250  shares  are  sold  to  subscribers  at  par  for  cash. 

The  following  is  a  summary  of  the  transactions  of  the  com- 
pany during  the  first  twelve  months  of  carrying  on  business : 

The  preliminary  and  formation  expenses  are  $12,500.00, 
which  are  paid  in  cash. 

They  purchase  freehold  and  leasehold  of  an  iron  works  and 
collieries  from  "A.  B."  Company  for  $1,250,000.00. 

They  take  over  from  them  the  necessary  plant  and  machinery 
at  $375,000.00,  and  a  stock  of  iron,  coal,  etc.,  at  $229,250.00. 

The  vendors  take  in  part  payment  of  their  purchase  money 
$50,000.00  of  First  Mortgage  Bonds,  and  $125,000.00  in  shares  of 
the  company,  fully  paid.  There  is  $1,679,250.00  paid  to  them  in 
cash  to  close  the  account. 

The  company  expends  during  the  year,  $54,200.00  in  addi- 
tions to  the  plant  and  machinery  by  purchases  from  sundry  credi- 
tors to  the  extent  of  $41,300.00,  and  by  payments  through  the 
cash  account  of  $12,900.00. 

They  purchase  materials  from  sundry  creditors  to  the  extent 
of  $461,500.00,  and  they  purchase  for  cash  to  the  extent  of  $67,- 
310.00.  They  pay  for  wages,  rents,  royalties,  tolls,  wagon  hire, 
repairs,  etc.,  $842,700.00. 

Their  sales  from  iron  and  coal  to  sundry  debtors  amount  to 
$1,526,585.00.  They  receive  in  cash  from  sundry  debtors  $1,- 
040,700.00. 

They  draw  on  sundry  debtors  bills  to  the  extent  of  $419,- 
740.00. 

They  transfer  of  the  above  amount  to  sundry  creditors  $54,- 
510.00,  and  the  bank  credits  their  account  with  $361,400.00,  the 
proceeds  of  those  discounted.    The  balance  is  discount. 

They  pay  in  cash  to  sundry  creditors  $231,415.00. 

They  accept  for  creditors,  bills  of  exchange  to  the  extent  of 
$142,110.00;  of  this  amount  they  meet  $86,005.00  through  their 
banking  account,  the  balance  being  still  current  at  the  end  of  the 
year.  They  borrow  on  First  Mortgage  Bonds  $375,000.00  which 
is  paid  into  their  banking  account  as  received. 

They  pay  to  their  bankers  for  interest  and  commissions 
$8,040.00;  for  salaries,  oflfice  expenses,  and  management,  $15,- 
670.00 ;  law  charges,  $410.00,  and  for  directors'  and  auditors*  fees, 
$3,010.00. 

They  write  off  five  per  cent  from  the  original  amount  of  the 
plant  and  machinery  for  depreciation,  but  nothing  from  the  addi- 
tions.  I 

They  also  write  off  the  following  amounts :  $25,000.00  from 
the  freehold  and  leasehold  property  to  cover  minerals  taken  from 
the  freehold  and  to  provide  for  the  expiration  of  the  leases; 
$3,005.00  for  bad  debts,  and  one-fifth  from  the  preliminary  ex- 
penses. 

The  discount  allowed  to  sundry  debtors  amounted  to  $5,- 
530.00. 


(Continued  on  next  page.) 


PRACTICAL  PROBLEMS,   GRADED,  SERIES  B 


Code  :    Elite —  ( Continued ) 

There  is  due  at  the  close  of  the  year  $2,250.00  for  interest 
on  bonds,  and  the  value  of  the  stock  of  materials  then  on  hand 
is  $154,285.00. 

All  receipts  are  paid  into  the  bank,  and  all  payments  are  made 
by  check. 

Prepare  Trading  and  Profit  and  Loss  Accounts  and  Balance 
Sheet  as  at  December  31st,  1907,  showing  the  result  of  all  the 
foregoing  transactions.  Marshall  the  assets  and  liabilities,  be- 
ginning the  former  with  the  most  liquid  asset,  and  the  latter  with 
the  liability  to  be  first  paid. 

Criticize  in  any  way  that  occurs  to  you  the  information  that 
the  Trading  and  Profit  and  Loss  Accounts  and  Balance  Sheet 
give. 


PRACTICAL  PROBLEMS,   GRADED,  SERIES  B 


Code  :    Elixer 

The  co-partnership  of  Kimball,  Bagley  and  Pettey  find  they 
havf  merchandise  on  hand  December  31st,  1903,  that  cost  $8,- 
724.00  and  is  inventoried  by  them  at  a  10  per  cent  advance ;  they 
also  have  unexpired  premiums  on  insurance  amounting  to  $46.75, 
and  accrued  interest  on  notes  receivable  amounting  to  $232.40  not 
entered  on  the  books ;  and  owe  interest  on  a  note  for  $4,000.00  for 
9  months  at  5  per  cent,  payable  to  Wm.  C.  Bagley.  The  articles 
of  co-partnership  provide  that  4  per  cent  shall  be  paid  each  part- 
ner on  his  investment,  and  in  event  of  partners  drawing  for  per- 
sonal use  they  are  to  pay  6  per  cent  for  such  money  so  drawn. 
Profits  are  to  be  divided  in  the  following  proportion:  Jas.  H. 
Kimball,  45  per  cent ;  Wm.  C.  Bagley,  32  per  cent ;  Geo.  R.  Pettey, 
23  per  cent. 

The  trial  balance  of  the  firm  and  its  partner's  accounts  on  the 
books  are  as  follows:     ' 

Dr.  Cr. 

Jas.  H.  Kimball,  Investment  Account $  $  12,675.00 

Wm.  C  Bagley,  Investment  Account 9,410.15 

Geo.  R.  Pettey,  Investment  Account 8,011.05 

Merchandise  40,425.00 

Expense  1,147.26 

Insurance    162.50 

Freight,  Cartage  and  Express 7,458.98 

Salaries  4,000.00 

Clerk  Hire  2,250.00 

Telegraph  and  Telephone  311.44 

Accounts  Receivable  27,816.42 

Notes  Receivable  8,640.00 

Notes  Payable  10,000.00 

Accounts  Payable  2,692.65 

Interest  and  Discount  1,118.36 

Jas.  H.  Kimball  Drawing  Account 3,750.00 

Wm.  C.  Bagley  Drawing  Account 1,000.00 

Geo.  R.  Pettey  Drawing  Account 1,425.00 

Returns  and  Allowances 1,186.79 

Sales  57,551.00 

Cash  1,648.10 

$101,339.85    $101,339.85 

Jas.  H.  Kimball,  Drawing  Account:  Dr.  Cr. 

March  10th,  withdrew $  1,650.00 

June  22nd,  withdrew 1,725.00 

July  15th,  paid  in 3,000.00 

October  1st,  withdrew  2,000.00 

November  1st,  withdrew 1,000.00 

December  29th,  withdrew 375.00 

Wm.  C.  Bagley,  Drawing  Account : 

June  1st,  withdrew 2,000.00 

September  20th,  withdrew 1,000.00 

December  1st,  paid  in  (6%  interest  to  be  credited 
him)  4,000.00 

Geo.  R.  Pettey,  Drawing  Account: 

April   1st,   withdrew _ 356.25 

July   1st,   withdrew ~ 356.25 

October  1st,  withdrew ~ 356.25 

December  31st,  withdrew 356.25 

Prepare  from  the  foregoing,  a  profit  and  loss  account  and  a 
balance  sheet. 


PRACTICAL  PROBLEMS,   GRADED,  SERIES  B 


Code  :   Elk 

A  corporation  needing  some  additional  capital  for  a  short 
term  of  years,  issues  $300,000.00  of  debenture  bonds  carrying  6% 
interest,  and  payable  one-fifth  each  year  for  five  years.  Coupons 
are  attached  to  the  bonds  maturing  every  six  months ;  the  bonds 
are  sold  at  90  flat. 

What  average  rate  of  interest  does  the  company  pay  for  the 

money  ? 


PRACTICAL  PROBLEMS,   GRADED,  SERIES  B 


Code  :    Ell 

"C"  and  "D"  owned  adjacent  vacant  real  estate  and  after 
consideration  decided  to  go  into  partnership.  When  the  agree- 
ment was  drawn  on  January  1,  1913,  the  situation  was  as  follows : 

"C"  turned  over  the  following  properties,  subject  to  incum- 
brances noted : 


Tract 
1 
2 
3 
4 


Valued  at 

$10,000.00 

30,000.00 

20,000.00 

50,000.00 


Mortgage 

5,000.00 

20,000.00 

10,000.00 

30,000.00 


Interest  Accrued 
150.00 
200.00 
300.00 
900.00 


"D"  turned  over  the  following  properties,  subject  to  incum- 
brances noted : 


Tract 
5 
6 
7 
8 


Valued  at 
75.000.00 
15,000.00 
30,000.00 
20,000.00 


Mortgage 

50,000.00 

5,000.00 

20,000.00 

15,000.00 


Interest  Accrued 

1,500.00 

100.00 

300.00 

300.00 


"C"  turned  in  a  cash  fund  of  $7,500.00  and  the  partnership 
as.sumed  his  liability  on  notes  payable  amounting  to  $20,000.00. 

"D"  owned  10,000  shares  in  the  Canadian  Townsite  Company 
which  he  transferred  to  the  partnership  at  a  valuation  of  $50,- 
000.00.  The  partnership  assumed  his  obligations  to  the  bank 
amounting  to  $30,000.00. 

During  the  year  1913,  "C"  operated  the  properties  and  sold 
the  following: 

On  June  30,  1913 :  Tract  No.  1  for  $15,000.00,  the  purchaser 
assuming  the  liability  for  mortgage  and  accrued  interest.  The 
cash  was  paid  into  the  partnership  bank  account. 

On  September  30,  1913 :  One  half  of  Tract  No.  4  was  sold 
for  $35,000.00,  the  purchaser  assuming  $20,000.00  of  the  mort- 
gage. All  interest  on  the  entire  mortgage  had  been  paid  to  Sep- 
tember 30,  1913. 

On  December  31,  1913 :  Tract  No.  6  was  .sold  for  $10,000.00, 
the  purchaser  taking  over  the  mortgage  and  all  interest  to  date. 

On  December  31,  1913 :  Tract  No.  8  was  sold  for  the  amount 
of  the  mortgage  and  all  interest  to  date. 

"C,"  in  addition  to  paying  all  the  interest  at  6%,  except  as 
above  noted,  to  December  31,  1913,  paid  the  following  expenses 
from  his  own  pocket:  Surveying,  $5,000.00;  legal,  $2,000.00; 
office,  $1,000.00;  salesmen,  $2,500.00. 

"D,"  not  having  been  active,  agreed  to  pay  **C"  $2,500.00  in 
respect  of  "C's"  work  during  the  year. 

At  December  31,  1913,  ''D"  agreed  to  purchase  from  "C"  the 
latter's  .stock  in  the  Aetna  Copper  Company  at  a  price  of 
$40,000.00. 

Record  the  above  transactions  by  journal  entry  and  there- 
after prepare  the  necessary  accounts  for  submission  to  the  two 
partners,  ''C"  and  ''D."    Profits  and  losses  will  be  shared  equally. 


PRACTICAL  PROBLEMS,   GRADED,  SERIES   B 


Code  :   Ellipse 

BALANCE  SHEET  OF  THE  OREGON  COMPANY  AS  AT 

DECEMBER  31,  1915. 

Dr.  Cr. 

Machinery  and  Equipment -..  $   460.000.00    $ 

Patents  and  Goodwill 500,000.00 

Investment   in    Nevada    Company — 

900  Shares  at  par  value  of  $100.00 

each,  purchased  on  July  1,  1915,  at 

cost  of  180,000.00 

Current  Assets — 

Inventory    $520,000.00 

Accounts  Receivable  340,000.00 

Bills     Receivable  —  Advances     to 
Nevada  Company  98,000.00 

Cash  52,000.00      1,010,000.00     . 

Deferred  Charges — 

Insurance,  Interest,  etc 8,000.00 

Preferred  Stock,  7%  700,000.00 

Common  Stock  800,000.00 

Current  Liabilities: 

Bills  Payable $200,000.00 

Accounts   Payable   180,000.00 

Accrued  Liabilities  42,000.00  422,000.00 

Surplus,    balance    at    beginning    of 

year $  89,000.00 

Net   Income  for  year 229,000.00 

$318,000.00 
Less— Dividends  paid  82.000.00  236,000.00 

$2,158,000.00    $2,158,000.00 

BALANCE  SHEET  OF  THE  NEVADA  COMPANY  AS  AT 

DECEMBER  31.  1915.  % 

Dr.  Cr. 

Land  and  Building  $  80,000.00    $ 

Machinery  and  Equipment  90,000.00 

Uncompleted  Construction  89.000.00  « 

Current  Assets — 

Inventory    $  43,000.00 

Accounts    Receivable    61,000.00 

Cash  1,200.00      105,200.00 

Deferred  Charges — 

Insurance,  Interest,  etc 1,000.00 

Common  Stock  (1.000  Shares) 100,000.00 

Current  Liabilities — 

Bills  Payable   (Oregon  Co.) $  98,000.00 

Accounts   Payable   102,200.00 

Accrued   Liabilities   3,000.00  203,200.00 

Srrplus,  balance  at  bcginnin-^  of  year....$  14.000.00 
Net  income  for  year 
(No  Dividends  paid)   48.000.00  62,000.00 

$365,200.00    $365,200.00 


PRACTICAL  PROBLEMS,    GRADED,    SERIES  B 


Code  :    Ellipse —  ( Continued ) 

With  the  above  figures  and  assuming  that  the  profits  of  the 
Nevada  Company  were  earned  proportionately  throughout  the 
year — 

1.  Prepare  a  ConsoHdated  Balance  Sheet  as  at  December 

31,  1915,  in  which  the  surplus  section  thereof  will  show 
the  balance  at  the  beginning  of  the  year,  the  net  income 
for  the  year,  the  dividends  paid  and  the  balance  at  the 
close  of  the  year. 

2.  Discuss  the  relative  merits  of  submitting  accounts  of  the 
Oregon  Company  by  itself,  and  submitting  Consolidated 
Accounts  in  this  case  and  advise  what  attitude  you  would 
take  if  the  client  stated  that,  for  credit  purposes,  he 
would  like  a  certified  balance  sheet  of  the  Oregon  Com- 
pany by  itself. 


PRACTICAL  PROBLEMS,   GRADED,  SERIES  B 


Code  :    Ellipsis 

The  Sound  Farm  Mortgage  Investment  Company  operates 
in  Montana  and  Chicago.  Its  business  is  the  loaning  of  money 
on  the  security  of  mortgages  of  farm  property — loans  being 
limited  to  50^  of  the  appraised  value  of  the  proposed  security — 
and  the  selling  of  mortgages.  The  loans  are  made  in  Montana 
at  a  practically  effective  interest  rate  of  9%  per  annum,  but  as 
mortgages  bearing  only  6%  are  saleable  in  Chicago,  the  difference 
of  3%  per  annum  for  the  term  of  the  loan  is  added  to  the  amount 
loaned,  and  the  mortgage  deed  is  drawn  up  to  cover  the  amount. 
The  mortgages  are  sold  at  face  value,  the  company  making  a  com- 
mission amounting  to  the  difference  between  the  face  value  of  the 
mortgage  and  the  amount  loaned.  For  example,  if  a  farmer 
desires  a  loan  of  $5,000  for  five  years,  he  is  required  to  pay  9% 
per  annum,  but  in  the  f :llowing  manner:  The  mortgage  deed  is 
drawn  up,  specifying  interest  at  6%  per  annum,  in  the  amount  of 
$5,750.00,  but  he  is  actually  loaned  only  $5,000.00.  The  differ- 
ence, $750.00,  represents  3%  per  annum  for  five  years  on  $5,- 
000.00.    The  mortgage  would  be  sold  for  $5,750.00. 

The  company,  in  order  to  carry  on  business,  has  to  borrow 
extensively,  paying  about  6%  per  annum  for  money,  and  of  course 
the  loans  have  to  be  covered  by  deposit  of  mortgages  as  collateral. 

You  are  required  to  show,  in  journal  form,  the  entries 
necessary  to  record  loans  made  and  the  sale  of  mortgages.  Give 
reasons  for  your  treatment. 

How  would  you  show  mortgages  on  hand  in  the  balance 
sheet?    Give  reasons. 


PRACTICAL  PROBLEMS,    GRADED,   SERIES  B 

Code  :   Elliptic 

As  on  January  1st,  1890,  a  corporation  is  formed  for  the 
purpose  of  acquiring  and  conducting  a  cemetery,  and  starts  busi- 
ness on  that  date  with  a  capital  stock  of  $100,000.00  paid  for  in 
cash.  The  company  first  purchases  forty  acres  of  land  within 
easy  access  of  a  large  city,  paying  for  it  at  the  rate  of  $1,000  per 
acre.  It  proceeds  to  expend  considerable  sums  of  money  in  the 
purchase  and  planting  of  trees  and  shrubs,  laying  out  drives  and 
pathways,  sodding,  building  of  glass  houses,  etc.  The  policy  of 
the  company  is  to  withhold  the  selling  of  burial  lots  until  after 
January  1st,  1900,  so  as  to  allow  the  trees  and  shrubs  to  become 
more  fully  grown  and  in  the  expectation  that  with  the  growth  of 
the  city  their  property  will  become  more  valuable.  In  the  year 
1900  the  company  commences  selling  burial  lots,  and  all  are  sold 
under  a  special  provision  whereby  the  company  agrees  to  apply 
fifty  per  cent  of  all  cash  received  on  sales,  in  the  purchase  of  four 
per  cent  bonds  until  a  total  of  $150,000.00  of  such  bonds  shall 
have  been  so  purchased.  The  agreement  further  provides  that 
after  all  lots  have  been  sold  the  company  will  wind  up  its  affairs 
and  shall  use  the  income  of  such  bonds  for  keeping  up  the  ceme- 
tery. It  is  the  custom  of  the  company  not  to  purchase  bonds  until 
after  the  close  of  each  fiscal  year  and  after  the  total  sales  of  that 
year  have  been  determined. 

In  March,  1905,  the  directors  of  the  company  find  that,  while 
they  believe  the  books  to  be  in  balance,  no  proper  entries  have 
been  recorded  showing  the  total  cost  of  their  investment,  and  that 
no  entries  have  been  made  with  respect  to  the  fund  of  $150,- 
000.00  from  which  said  bonds  are  to  be  purchased.  While  cash 
dividends  have  been  declared  and  paid,  the  directors  are  in  ig- 
norance of  what  their  profits  actually  have  been  and  how  much 
of  the  dividends  so  received  have  been  paid  out  of  the  profits  and 
how  much  in  the  nature  of  liquidated  dividends,  representing  a 
return  of  their  original  investment.  They,  therefore,  employ  a 
certified  public  accountant  to  determine  all  these  matters  and  to 
make  the  necessary  entries  on  their  books  and  render  report  to 
them.  After  determining  the  clerical  accuracy  of  the  books,  the 
accountant  draws  oflF  the  two  trial  balances  given  below  and  from 
them  prepares  the  necessary  entries  and  obtains  the  information 
required  by  the  directors. 


(Continued  on  next  page.) 


PRACTICAL  PROBLEMS,    GRADED,    SERIES  B 


Code:    Elliptic — (Continued) 

TRIAL  BALANCES 

Debits--                                                                       Jan.  1„1900  Jan.  1, 1905 

Real  estate  $  40,000.00  $  40,000.00 

Improvements   45,000.00  45,000.00 

Bonds  125,000.00 

Administration  expense  20,000.00  46,'000!00 

Upkeep  of  cemetery 45,000.00 

Dividends  paid 130,000.00 

Cash 7,000.00  40,800.00 

$112,000.00  $471,800.00 

Credits — 
Interest  account  representing  interest  at  4  per  cent 

on  unexpended  cash  during  development  period..$  12,000.00  $  12,000.00 

Bond  interest  account  9800.00 

Sales  of  lots 35000000 

Capital  stock 100,000.00  lOO.'oOO.OO 

$112,000.00  $471,800.00 


An  inventory  of  their  unsold  lots  as  on  January  1,  1905, 
shows  that  they  have  ten  acres  left  unsold  of  equally  desirable 
character  with  that  already  sold.  Draw  up  entries,  prepare  profit 
and  loss  account  for  the  period  and  balance  sheet  as  on  January 
1st,  1905,  in  the  same  manner  as  if  you  had  been  the  accountant 
engaged.  In  any  interest  calculation  use  four  per  cent  simple 
interest. 


PRACTICAL  PROBLEMS,    GRADED,    SERIES  B 


Code  :   Elm 

The  following  trial  balance  was  taken  from  the  books  of  the 
Moore  &  Smith  Hardware  Company,  of  date  December  31,  1914: 

Cash  on  Hand ^ $  100.00    $ 

Cash  in  Bank 3,000.00 

Sales  — : 1,150,000.00 

Discounts  on  Purchases „ _  20,000.00 

Interest  on  Notes  Receivable _  l^OOO.OO 

Accounts  Receivable  ^ 150,000.00 

Notes  Receivable 10,000.00 

Capital  Stock  _  200,000.00 

Real  Estate 50,000.00 

Buildings    200,000.00 

Equipment  50,000.00 

Horses,  Wagons,  and  Harness 5,000.00 

Motor  Trucks  ^ „ 5,000.00 

Insurance    2,000.00 

Taxes    5,000.00 

Purchases 900,000.00 

Discounts  on  Sales— Cash 20,000.00 

Wages  of  Men  in  Warehouse „...  25,000.00 

Salaries  of  Department  Managers i 10.000.00 

Salaries  of  Office  Assistants '. 5,000.00 

Drivers,  Teamsters,  etc 5,000.00 

Horse  Feed 2,000.00 

Auto  Expense  1,500.00 

Inventories— as  at  January  1,  1914 300,000.00 

Inventories   of   Horse   Feed,   Auto   Accessories, 

etc.,  as  at  January  1,  1914 3,000.00 

Inventories  of  Stationery,  Advertising,  etc.,  as  at 

January  1,  1914 2,000.00 

Office  Supplies,  Stationery,  etc 3,000.00 

Advertising  50,000.00 

Salesmen's  Salaries  20,000.00 

Salesmen's  Commissions  11,000.00 

Interest  on  Notes  Pavable 10,000.00 

Dividend  on  Capital-^% 12,000.00 

Notes  Payable  250,000.00 

Accounts  Payable _ 150,000.00 

Real  Estate — not  used  in  Business 150,000.00 

Investment  in  Union  Hotel  Co.,  at  Cost 50,000.00 

Sprinkler  System — at  face  of  Contract 10,000.00 

Liability  on  Sprinkler  System „ 8,000.00 

Surplus  _ 290,600.00 

$2,069,600.00    $2,069,600.00 

On  December  31,  1914,  the  company  authorized  the  issue  of 
$300,000.00  cumulative  7%  Preferred  Stock  and  sold  same  to  the 
Grand  Investment  Company  at  90%,  giving  also  a  bonus  of 
$30,000.00  common  stock.  $70,000.00  common  stock  was  sold  to 
the  present  stockholders  at  par,  the  total  issue  of  common  stock 
being  $300,000.00.  Of  the  proceeds  of  these  sales,  $150,000.00  was 
to  be  expended  on  new  buildings,  the  balance  to  be  retained  for 
working  capital. 


(Continued  on  next  page.) 


PRACTICAL  PROBLEMS,   GRADED,    SERIES  B 


Code:    Elm — (Continued) 

On  January  2,  1915,  a  dividend  of  $40,000.00  was  declared, 
payable  on  January  15,  1915. 

The  inventories  at  December  31,  1914  were : 

Merchandise  $325,000.00 

Horse  Feed,  Auto  Accessories,  etc 1,000.00 

Stationery,  Advertising,  etc 1,500.00 

Of  the  insurance  paid,  $500.00  applies  to  the  year  1915;  also 
$1,500.00  of  the  taxes. 

The  sprinkler  system  was  installed  on  July  1,  1914.  Of  the 
contract  price  $2,000.00  was  paid  on  that  date  and  $2,000.00  is 
payable  on  each  date  August  1,  1915,  1916,  1917  and  1918. 

Two  Thousand  Dollars  of  interest  applies  to  the  period  subse- 
quent to  January  1,  1915. 

The  depreciation  on  buildings  for  the  year  is  $10,000.00  and 
on  equipment  $5,000.00.  The  real  estate  not  used  in  the  business 
has  appreciated  $50,000.00,  while  that  used  in  the  business  has 
been  appraised  at  $75,000.00. 

From  the  foregoing  trial  balance  and  data,  prepare  an  income 
and  profit  and  loss  account  for  the  year  and  a  balance  sheet  at 
December  31,  1914. 


PRACTICAL  PROBLEMS,   GRADED,     SERIES  B 

Code:   Elocution 

The  Universal  Cash  Register  Company  is  engaged  in  the 
manufacture  of  cash  registers,  and  suppHes  pertaining  thereto. 
The  sale  of  these  cash  registers,  etc.,  is  accomplished  by  means  of 
a  large  number  of  branch  houses  and  agencies,  and  all  goods 
shipped  by  the  factory  to  these  branch  houses,  etc.,  are  put  on 
consignment  account  at  list  prices.  In  addition  to  the  sale  of  new 
cash  registers,  they  also  sell  a  large  quantity  of  second-hand 
registers,  which  they  have  obtained  by  taking  second-hand  regis- 
ters in  part  payment  of  ntvv  registers.  These  second-hand  regis- 
ters also  are  put  on  consignment  account,  but  not  at  list  prices, 
but  at  actual  cost  to  the  company ;  the  reason  for  this  procedure 
being  that  they  have  no  fixed  belling  price  for  second-hand  ma- 
chines, their  branch  house  managers  and  agents  being  authorized 
to  sell  them  at  as  a  high  a  figure  as  they  can  get,  but  on  no  account 
to  allow  themselves  to  become  over-stocked  with  them.  It  often 
happens  that,  on  receiving  the  second-hand  register  at  a  branch, 
it  is  found  advisable  to  ship  it  to  the  factory,  so  that  certain  re- 
pairs may  be  effected  to  put  it  in  saleable  condition.  When  these 
repairs  are  completed,  the  second-hand  register  may  be  shipped 
lo  some  point  entirely  different  from  that  which  it  originally  came. 

Branch  house  managers  are  paid  a  fixed  salary,  but  attached 
to  each  branch  house  are  a  number  of  salesmen  who  receive  no 
salary,  but  are  paid  on  a  purely  commission  basis,  and  on  the  same 
terms  as  those  given  to  agents.  For  the  purpose  of  this  question 
it  will  be  assumed  that  no  register  is  ever  sold  without  a  com- 
mission being  paid  to  a  salesman  or  agent,  and  on  the  sale  of  every 
new  register  the  rate  of  commission  is  thirty  (30)  per  cent.  But 
when  a  second-hand  machine  is  accepted  in  part  payment  of  a 
new  register,  the  salesman  or  agent  only  receives  twenty  (20) 
per  cent  of  the  net  amount  that  will  be  received  in  cash  and  notes 
from  the  customer.  On  sales  of  second-hand  machines  a  commis- 
sion of  twenty  per  cent  is  paid.  The  terms  to  customers  are  25 
per  cent  cash,  and  the  balance  in  ten  equal  monthly  installments ; 
a  separate  note  being  given  for  each  installment.  Upon  failure  of 
a  purchaser  to  pay  any  part  of  the  purchase  price,  the  register 
is  pulled  (that  is,  taken  out  and  returned  to  the  agency  or  branch 
house  selling  it),  and  the  agent  or  salesman  then  only  receives 
pro-rata  amount  of  his  commission,  the  actual  cash  collected  being 
the  basis  of  his  commission.  The  amount  that  has  been  paid  in  on 
account  of  a  register  which  is  pulled  is  clear  profit,  barring  any 
legal  expense  in  connection  therewith,  and  the  customer's  open 
account  or  notes  receivable  account  is  closed  out  by  a  transfer  to 
an  account  termed  "Retained  Payments,"  or  "Retained  Second- 
hand Machines."     The  branch  houses  and  agents  keep  no  ac- 


( Continued  on  next  page.) 


V 


PRACTICAL  PROBLEMS,  GRADED,    SERIES  B 


Code:    Elocution — (Continued) 

counts,  all  accounts  and  collections  being  attended  to  at  the  head 
office.  Amongst  others,  the  following  accounts  are  kept  on  the 
general  books : 

New  Register  Consigned  Stock  Account  (always  debit  balance). 
New  Register  Consignment  Account  (always  credit  balance,  and  offset- 
ting balance  of  Consigned  Stock  Account). 
Second-hand  Consigned  Stock  Account. 
Second-hand  Consignment  Account. 
New  Register  Sales  Account. 
Second-hand  Register  Sales  Account. 
New  Register  Commission  Account. 
Second-hand  Register  Commission  Account. 
Retained  Payments  Commission  Account. 
New  Register  Commission  Adjustment  Account. 
Notes  Receivable  Ledger  Account. 
Customers  Ledger  Account. 
Second-hand  Register  Cost  Account. 
Agent  and  Salesman's  Commission  Ledger  Account. 
Retained  Payments. 
Retained  Second-hand  Machine  Account. 

As  a  check  upon  the  New  Register  Commission  Account,  a 
rule  is  laid  that  in  all  sales  of  new  registers,  whether  a  second- 
hand register  be  accepted  in  part  payment  or  not,  the  New  Regis- 
ter Commission  Account  must  be  charged  with  30%  of  the  list 
price  of  the  register  sold. 

Draw  up  journal  entries  for  the  following  transactions: 

(a)  Herbert  Davison,  a  salesman  in  the  Chicago  branch,  sells 
a  new  cash  register  to  the  Madison  Restaurant  Company,  having 
a  list  price  of  $240.00.  The  restaurant  company,  one  month  after 
the  delivery  of  the  register,  pays  cash  of  $G0.00,  and  gives  ten 
installment  notes  of  $18.00  each,  the  first  one  due  one  month  after 
date,  the  second  two  months  after  date,  and  so  on.  After  meeting 
the  first  five  notes,  the  Madison  Restaurant  Company  becomes 
bankrupt,  and  the  Universal  Cash  Register  Company  pulls  the 
register.  Show  all  of  the  entries  necessitated  by  the  above  trans- 
actions, including  commissions  to  salesman. 

(b)  Thomas  Smith,  an  agent  for  the  company,  sells  a  cash 
register  to  Herbert  Findlay  for  $350.00,  and  takes  in  part  payment 
a  second-hand  register  at  $50.00.  After  delivery  of  the  new 
register  to  Herbert  Findlay  and  the  receipt  at  the  factory  of  the 
second-hand  register,  a  settlement  of  the  account  is  effected  by  a 
cash  payment  of  $75.00  and  the  acceptance  by  the  company  of  ten 
installment  notes  of  $22.50  each  made  by  Herbert  Findlay.  The 
latter  pays  the  first  two  notes,  but  fails  to  make  any  more  pay- 
ments on  the  other  notes.  The  register  is,  therefore,  pulled.  Show 
all  of  the  entries  necessitated  by  the  above  transactions,  including 
commission  to  Thomas  Smith,  the  agent. 

(c)  The  second-hand  register  returned  to  the  factory  and  re- 
ferred to  in  the  last  question  has  repairs  put  upon  it  costing  $25.00, 
and  it  is  then  shipped  to  the  New  York  branch  and  consigned  to 


PRACTICAL  PROBLEMS,  GRADED,   SERIES   B 


Code  :    Elocution —  (  Concluded  ) 

them  at  the  actual  cost,  commission  saved  not  being  considered, 
to  the  Universal  Cash  Register  Company  up  to  that  time.  A  sales- 
man, Edgar  Robinson,  sells  the  register  to  Abner  Johnson  for 
$100.00,  and  the  latter  settles  for  it  by  paying  cash  down.  Show 
all  of  the  entries  necessitated  by  the  above  transaction  including 
commission  to  Edgar  Robinson,  and  also  state  what  profit  the  com- 
pany made  on  this  register,  and  how  you  arrive  at  it. 


PRACTICAL  PROBLEMS,  GRADED,   SERIES  B 


Code  :    Elongate 

The  shareholders  of  a  company  with  bonds  outstanding  of 
$500,000.00  bearing  interest  at  5%  per  annum,  resolve  to  provide 
for  paying  them  off  when  they  fall  due  on  December  31st,  1912, 
by  investing  $50,000.00  per  annum  out  of  the  profits  and  allowing 
it  to  accumulate  with  interest ;  this  arrangement  to  commence  with 
the  balance-sheet  for  the  year  ending  December  31st,  1904.  Show 
the  "Bond  Redemption  Account"  on  December  31st,  1908,  on  the 
assumption  that  on  December  31st,  1904,  and  on  the  same  day  in 
each  year  following,  the  $50,000.00  referred  to  was  invested  in  4% 
railroad  bonds  at  par,  that  the  interest  thereon  to  June  30th  and 
December  31st  in  each  year  was  received  in  July  and  January 
following,  and  was  allowed  to  accumulate  in  the  bank  until  June 
30th  and  December  31st  following,  when  it  was  invested  in  the 
same  class  of  securities  at  the  same  price  in  multiples  of  $1,000.00. 


PRACTICAL  PROBLEMS,  GRADED,    SERIES  B 


Code:    Elope 

A  Share  and  Investment  Corporation  promoted  a  subsidiary 
corporation,  and  on  January  1,  1905,  subscribe  $30,000.00  worth 
of  stock  receiving  also  $70,000.00  stock  as  consideration  for  their 
services  as  promoters.  Their  promotion  expenses  amounted  to 
$500.00.  Sales  of  their  holdings  in  the  subsidiary  corporation  are 
made  as  follows : 

Stock  Price  Realized 

February  $  5,000.00  $  1,000.00 

March    10,000.00  2,500.00 

April    10,000.00  3,000.00 

May 10,000.00  5,500.00 

June   _ 10,000.00  7,500.00 

October  5,000.00  1,500.00 

At  December  31,  1905.  the  parent  corporation's  financial  year 
closes,  at  which  date  they  hold  a  balance  of  $50,000.00  of  the 
stock,  the  current  market  price  being  $25  per  $100  share. 

Give  detailed  ledger  account,  bringing  down  the  balance  at 
the  figure  at  which  it  should  be  shown  on  the  balance  sheet,  and 
assign  your  reasons  for  the  valuation  you  place  upon  it. 


PRACTICAL  PROBLEMS,   GRADED,    SERIES  B 


Code  :   Eloquent 

"X"  of  New  York  is  the  purchasing  agent  of  "Y,"  a  South 
American  trader,  who  pays  "X"  a  commission  of  5%  on  all 
transactions  executed.  "X"  executes  his  orders,  draws  a  draft 
on  "Y"  for  the  amount  involved  and  discounts  the  draft  with  a 
New  York  bank,  which  pays  the  debts  created  by  the  purchase. 
The  bank  forwards  the  draft  of  "X"  for  collection. 

"Y"  orders  through  "X"  100  barrels  of  flour,  purchased  of  "A," 
"B"  &  "C,"  @  $10.40  per  barrel ;  freight  paid  $92,  cartage  paid 
$38,  insurance  etc.  $18.  He  orders  also  through  "X"  miscella- 
neous goods  purchased  of  "D,"  "E"  &  "F,"  amounting  to  $7,500 ; 
freight  paid  $72,  cartage  paid  $32,  insurance  $20.  "X"  draws  a 
60  day  draft  in  favor  of  the  bank  for  the  amount  due,  which  was 
discounted  at  1%. 

Create  ledger  accounts  to  express  correctly  the  above  trans- 
action. The  insurance  is  covered  under  a  floating  policy.  Fur- 
nish a  trial  balance  of  the  ledger. 


PRACTICAL  PROBLEMS,    GRADED,    SERIES  B 


Code  :   Else 

The  Black  Birch  Spool  Company  decided  to  retire  from  business 
and  dissolve  the  corporation.  To  that  end  a  meeting  of  the  stock- 
holders was  called  for  September  10,  to  consider  and  determine 
the  advisability  of  such  action.  The  stockholders  decided  to  dis- 
solve the  company  and  authorized  the  president  and  the  treasurer 
to  perform  all  necessary  acts  to  accomplish  this  end  at  the  earliest 
possible  date. 

A  trial  balance  from  the  company's  books  taken  at  the  close 
of  business,  August  31,  showed  the  following  amounts: 


Land   and  building  $  55,000 

Machinery  and  machine  tools....  35,000 

Shop  and  hand  tools  (in  store)..  5,000 

Furniture  and   fixtures 9,700 

Raw  materials  and  freight  there- 
on      10,350 

Accounts  receivable  23,400 

Cash  in  bank  and  in  offices 11,320 


First  mortgage  6%  bonds $  26,000 

Interest  accrued  on  above  bonds  312 

Accounts  payable  21,700 

Reserve  for  depreciation  of 

building   5,300 

Reserve  for  depreciation  of  ma- 
chinery      8,000 

Reserve  for  depreciation  of  fur- 
niture and   fixtures 5,100 

Surplus    23,358 

Capital  stock,  authorized,  issued 

and  outstanding  60,000 


$    149,770 


$    149,770 


The  land  and  building  were  sold  to  the  mortgagee  for  $50,000 
as  of  August  31.  The  entries  on  the  cashbook  between  September 
1  and  September  30  show  the  following  receipts  and  disburse- 
ments : 

Receipts:  Land  and  building  $21,234;  machinery  $25,340;  shop 
and  hand  tools  $2,100 ;  furniture  and  fixtures  $3,700 ;  raw  mate- 
rials $7,950;  accounts  receivable  $23,130. 

Disbursements:  Accounts  payable  $21,700;  miscellaneous  ex- 
penses $1,530.20. 

Prepare  (a)  journal  entries  reflecting  the  dissolution  of  the 
company,  as  at  September  30,  (b)  statement  of  realization  and 
liquidation  that  will  show  the  percentage  payable  to  the  stock- 
holders on  their  holdings. 


PRACTICAL  PROBLEMS,    GRADED,   SERIES  B 


Code  :   Elucidate 

A  fire  insurance  company  began  business  with  a  capital  of 
$400,000  and  a  surplus  of  $400,000  paid  in  cash.  At  the  end  of 
the  year,  its  books  show  the  following: 

Income:  gross  premiums  $707,135.84,  less  reinsurance  rebates 
and  return  premiums  $94,971.27;  interest  on  mortgage  loans, 
received  in  cash  $6,803.65,  and  interest  accrued  and  due  $1,349.87 ; 
interest  on  collateral  loans,  received  in  cash  $1,014.44  and  accrued 
and  due  $4,228.32;  interest  on  bonds  and  dividends  on  stock, 
received  in  cash  $16,841.65  and  accrued  and  due  $186;  profit  on 
sale  of  assets  $4,204.52. 

Outgo:  gross  amount  paid  for  losses  $115,048.22,  less  salvages 
$14,900;  gross  claims  for  losses  in  process  of  adjustment  $32,- 
263.83;  gross  claims  for  losses  resisted  $8,618.50,  less  due  and 
accrued  for  reinsurance  $11,412.71 ;  commissions  or  brokerage 
paid  in  cash  $123,544.19,  and  due  or  to  become  due  $9,519.24; 
salaries,  fees  and  all  other  charges  of  officers,  clerks  and  other 
employees  paid  $24,755.68 ;  rents  paid  $4,224.93 ;  taxes,  licenses, 
insurance  department  fees  paid  $9,764.99 ;  all  other  expenses  paid 
$20,820.12;  due  and  accrued  expenses  $621.29;  due  and  accrued 
return  premiums  $9,597.36;  due  and  accrued  reinsurance  pre- 
miums $6,856.48.  The  market  value  of  securities  owned  was 
$20,625  less  than  their  cost. 

The  risks  in  force  at  the  end  of  the  year  carried  premiums  of 
$580,867.07,  of  which  sum  $424,747.65  was  the  aggregate  of 
premiums  on  risks  running  one  year  or  less,  and  $156,119.42  was 
the  aggregate  on  risks  running  more  than  one  year,  the  unearned 
premiums  on  which  amounted  to  $111,950.46. 

Set  up  the  income  accounts,  making  due  allowance  for  un- 
earned premiums. 


PRACTICAL  PROBLEMS,  GRADED,    SERIES  B 


Code  :    Elude 


James  Stetson  i«  appointed  trustee  of  the  manufacturing  busi- 
ness of  John  Brightlawn,  for  the  purpose  of  rehabihtation.  On 
taking  charge,  he  finds  that  the  available  assets  are :  Cash  in  bank, 
$35o;  accounts  receivable  (a)  good,  $3,712,  (b)  probably  uncol- 
lectible, $350.  The  working  and  trading  assets  consist  oif:  Raw 
materials,  $17,258;  sundry  manufacturing  supplies,  $700;  finished 
goods,  $8.000 ;  goods  in  process,  $30,945.70.  Other  assets  com- 
prise :  Machinery  and  machine  tools,  $41,000 ;  shop  and  hand  tools, 
$1,300;  deferred  debits  to  manufacturing,  $530.  The  liabilities 
are :  Creditors'  accounts,  $39,700 ;  wages  accrued,  productive  $500, 
unskilled  $230. 

The  transactions  under  the  trusteeship  are  as  follows :  Loaned 
by  creditors  for  immediate  needs,  $7,000.  Purchased  on  book 
accounts :  Raw  materials,  $8,300 ;  sundry  manufacturing  supplies, 
$9,500.  I-actory  expense:  Paid  in  cash,  $1,300;  incurred  as  a 
liability  to  creditors  and  subsequently  liquidated,  $2,100.  The 
doubtful  accounts  receivable  proved  worthless.  Cash  paid  for: 
Productive  labor,  $16,000;  unskilled  labor,  $2,500;  general  ex- 
pense, $8,000 ;  additional  shop  tools,  $009 ;  freight  inward,  on  raw 
materials  manufactured  and  sold,  $(50.  Interest  allowed  to  credit- 
ors on  their  accounts  amounted  to  $143.10.  The  trustee  advanced 
$4,300  to  John  Brightlawn  on  account  of  expected  profits;  the 
sales  of  finished  wares  amount  to  $91,000. 

At  the  close  of  the  trusteeship,  the  trustee's  books  show  the 
working  and  trading  assets  to  be:  Finished  goods,  $11,000;  goods 
in  process,  $10,450;  raw  materials,  $1,945.70;  manufacturing  sup- 
plies, $395.25.  There  is  besides  an  amount  of  $750.10  represent- 
ing factory  expenses  unapplied.  The  creditors'  accounts  show  a 
balance  of  $1,650.30,  while  the  uncollected  accounts  receivable 
amount  to  $2,975.36.    The  shop  and  hand  tools  amount  to  $1,009. 

Prepare  a  report  which  will  reflect  logically  and  clearly  the 
result  of  J.  Stetson's  administration. 


PRACTICAL  PROBLEMS,    GRADED,    SERIES  B 


Code  :    Elusion 

"A"  contracts  with  a  textile  establishment  to  sell  the  mill's  an- 
nual output  on  the  following  conditions: 

The  mill  is  to  bill  the  output  to  "A"  at  cost.  "A"  is  to  finance 
the  mill  to  the  extent  of  75%  of  cost  on  receipt  of  goods.  The 
balance  is  to  be  remitted  by  "A,"  as  the  various  shipments  are 
sold,  less  5%  and  advances.  At  the  end  of  a  year,  an  analysis  of 
"A's"  affairs  reveals  the  following,  as  shown  by  his  books,  the 
goods  being  sold  at  10%  profit  above  factory  cost  (mill  shipments 
$7,327,918.18)  : 

,,„                                                                          Debits  Credits 

Mill  advances  $  5,545,938        $  5,000,000 

Mill  sales  6,400,000  7,840,710 

Freight  and  cartage 90,000  80,000 

Customers   7,840,710  7,632,200 

Cash  7,610,200  5,635,938 

Discounts  22,000 

Commission   320,000 

Mill  account  .-. 1,000,000 

$27^508,848       $27,508,848 
Prepare  "A's"  financial  statement. 


PRACTICAL  PROBLEMS,    GRADED,    SERIES  B 


Code  :   Emanate 

Plant  &  Company  and  Edwards  &  Company  ship  merchandise 
to  South  America  on  joint  account.  Edwards  &  Company  gave 
Plant  &  Company  $1,200  in  cash  and  their  acceptances  at  six 
months  for  $3,000.  Plant  &  Company  were  to  provide  balance 
of  cash  required,  to  manage  the  venture  and  receive  a  commission 
of  2%  on  amount  of  invoice  for  merchandise.  Profits  to  be 
divided  equally. 

Plant  &  Company  paid  Smith  &  Greer  for  merchandise  $5,000, 
and  discounted  Edwards  &  Company's  acceptances  for  $3,000,  at 
2%  discount.  Plant  &  Company  prepaid  freight  $420,  insurance, 
$60.  In  due  time,  Plant  &  Company  received  from  South  America 
an  account  sales  for  merchandise  and  a  draft  for  the  net  proceeds, 
payable  in  London  for  $3,200,  out  of  which  Plant  &  Company 
paid  $3,000  to  retire  bills  for  that  amount. 

Later  Plant  &  Company  received  a  draft  for  $3,100,  being  bal- 
ance of  proceeds  of  sale  of  merchandise.  The  joint  account  with 
Edwards  &  Company  was  closed  and  a  check  for  the  balance  due 
them  was  paid  to  Edwards  &  Company. 

Prepare  a  statement  showing  details  of  the  joint  account,  also 
a  statement  of  Edwards  &  Company's  account. 


PRACTICAL  PROBLEMS,  GRADED,    SERIES  B 


Code:    Embalm 


The  office  of  a  firm  of  traders,  doing  business  in  San  Francisco, 
was  destroyed  by  an  earthquake.  The  books  of  account,  which 
had  been  fully  posted,  were  badly  damaged.  The  following  ledger 
accounts  were  found  to  be  legible : 

Purchases,  net  $69,000;  Discounts  Lost,  $640;  Discounts 
(Gained,  $3.150 ;  Sales,  $54,000 ;  Bills  Receivable,  $33,000.  Inquiry 
at  the  bank  disclosed  a  balance  on. deposit  $129,000.  Bills  receiv- 
able amounting  to  $45,000  had  been  discounted  at  the  bank.  An 
audit  of  the  checks  paid  by  bank  showed  that  $99,000  had  been 
paid  creditors  (including  $60,000  notes  payable).  A  balance 
sheet  prepared  at  the  last  closing  of  the  books  was  produced, 
containing  the  following  items : 

Cash,  $60,000 ;  Accounts  Receivable,  $126,000 ;  Loans  Receiv- 
ed ble,  $24,000 ;  Real  Estate,  $90,000 ;  Notes  Receivable,  $78,000 ; 
Capital,  $318,000;  Notes  Payable,  $60,000. 

Prepare  a  trial  balance  supplying  the  missing  accounts. 


f) 


Code:  Enable 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  B 


On  paper  ruled  as  for  a  stock  ledger 
make  entry  of  the  following  stock  trans- 
actions of  William  Henderson,  closing 
the  account  as  of  October  31,  1904,  and 
carrying  down  the  balance : 

(a)  100  shares  (par  value  $100.00) 
originally  issued,  full  paid  at  par,  to  Wil- 
liam Henderson  by  certificate  No.  5, 
August  16,  1904. 


(b)  William  Henderson  sells  50  shares 
of  the  original  100  to  Charles  Gibbons  at 
$120.00,  September  14,  1904,  receiving 
certificate  No.  37  for  shares  retained. 

(c)  October  28,  1904,  William  Hen- 
derson purchases  from  John  Hogan  25 
shares  at  $115.00  and  receives  certificate 
No.  78. 


Code:  Enact 


Of  $300,000  authorized  capital  (com- 
mon stock)  $260,000  has  been  subscribed. 
$80,000  was  paid  in  cash  and  $100,000  in 
property.  The  remainder  is  to  paid  in 
cash  in  five  equal  instalments.    The  first 


instalment  has  been  called  and  collected. 
The  second  instalment  has  been  called, 
but  has  not  yet  been  collected.  Make 
original  entries  covering  above  trans- 
actions and  prepare  ledger  accounts. 


/ 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  B 


Code:  Encamp 

It  is  proposed  to  organize,  for  conducting  a  manufacturing 
business,  a  small  corporation  based  on  certain  rights  and  franchise-, 
owned  by  one  of  the  proposed  stockholders  in  the  corporation. 
The  amount  of  capital  stock  is  to  be  $100,000.  The  owner  of  the 
rights  and  franchises  agrees  to  transfer  them  to  the  corporation  in 
consideration  of  $50,000  of  the  capital  stock,  though  he  believes 
them  to  be  worth  much  more  than  that  amount.  The  remainder 
of  the  capital,  stock  is  to  be  sold  to  produce  working  capital. 
Certain  capitalists  are  to  be  approached  for  cash  subscriptions 
to  the  capital  stock,  but  it  is  uncertain  what  opinion  they  will  hold 
concerning  the  enterprise,  and  it  is  desired  to  have  the  stock  in 
the  treasury  in  such  form  that  it  can  be  sold  below  par  if  necessary. 
What  method  would  you  suggest  for  accomplishing  the  object  in 
view?  Formulate  the  journal  entries  for  opening  the  corporation 
books. 


% 


PRACTICAL   PROBLEMS,  GRADED,   SERIES  B 


Code:  Enchain 

A  Mining  Company  is  organized  with  a  capital  stock  of 
$100,000  in  shares  of  $1  each.  The  entire  capital  stock  is  issued 
in  payment  for  the  properties  acquired  by  the  company.  The 
stockholders  then  return  to  the  company,  as  a  gift,  25,000  shares, 
which  are  to  be  sold  by  the  company  for  the  purpose  of  providing 
working  capital.  The  company  afterwards  sells  10,000  of  these 
shares  at  50c  each,  and  the  remainder  at  75c  each. 

Prepare  journal  entries  covering  these  transactions. 


PRACTICAL  PROBLEMS,  GRADED,   SERIES  B 


Code:  Enchant 

"A,"  "B"  and  "C"  constitute  a  firm 
engaged  in  a  manufacturing  business, 
which  they  have  decided  to  change  into 
a  stock  company  with  a  capital  of  $100,- 
000,  equally  divided  into  common  and 
preferred  stock,  par  value  of  each  share 
$100.  Each  partner  is  to  take  stock  to 
the  amount  of  his  net  investment  in  the 
business  on  the  basis  of  75%  preferred 
and  25%  common  stock,  and  the  remain- 
ing shares  authorized  are  to  be  offered 
for  sale.    On  the  taking  over  of  the  busi- 


ness the  books  of  the  company  show  as- 
sets as  follows:  real  estate,  $25,000; 
machinery  and  tools,  $10,000;  merchan- 
dise, $15,000;  material  and  supplies, 
$8,000;  cash,  $5,000;  notes  receivable, 
$3,000 ;  accounts  receivable,  $9,000.  The 
liabilities  are:  notes  payable,  $10,000; 
accounts  payable,  $5,000 ;  "A,"  $25,000 ; 
"B,"  $20,000,  and  "C,"  $15,000. 

Formulate  the  necessary  entries  to 
close  the  books  of  the  firm  and  to  open 
the  corporation  ledger. 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  B 


Code:  Encircle 

Being  called  upon  to  audit  the  books  of  a  company  which 
is  engaged  upon  perfecting  a  patented  machine  to  be  placed 
upon  the  market  you  have  found  it  necessary  to  give  consid- 
erable attention  to  the  transactions  recorded  in  the  books  in 
connection  with  the  issuance  and  installment  sales  of  the 
capital  stock. 

Originally  1,000,000  shares  of  the  par  value  of  $1.00  ieach 
were  issued  to  the  inventor  of  the  machine  in  exchange  for 
the  patent  rights,  but  400,000  shares  were  donated  back  to  the 
company  to  provide  working  capital. 

Stock  was  then  sold  at  a  discount  of  50%  through  selling 
agents,  who  received  as  their  commission,  in  the  case  of  stock 
sold  for  cash,  45%  of  the  amount  received,  and  in  the  case  of 
stock  sold  on  the  basis  of  10%  cash  and  the  balance  in  9  equal 
installments,  60%  of  the  first  four  payments  and  40%  of  the 
.  remaining  six  payments.  Occasionally  in  the  case  of  substan- 
tially large  sales  of  stock  for  cash,  a  stock  bonus  of  5%  was 
given  by  the  selling  agents,  who,  however,  were  to  pay  for 
the  bonus  stock  at  a  further  discount  of  50%,  out  of  their  com- 
mission. 

Give  the  entries  necessary  to  record  the  stock  transactions 
up  to  the  point  where  the  400,000  shares  was  received  back  by 
the  company  and  an  outline  of  a  plan  for  properly  recording 
the  installment  stock  sales. 


PRACTICAL  PROBLEMS,  GRADED,   SERIES  B 


Code  :   Enclose 


The  Domestic  Manufacturing  C  ompany, 
organized  with  a  capital  stock  of  $5,000,- 
000,  one-half  preferred  stock  and  one-half 
common  stock,  sells  five  shares  of  the 
common  stock  at  par  for  cash.  It  issues 
lo  John  Jones  $1,500,000  preferred  stock 
and  $1,000,000  common  stock  in  consid- 
eration of  the  assignment  by  him  of.  cer- 
tain patents,  rights  and  contracts.  Later, 
Jones  agrees  to  surrender  for  valuable 
consideration  to  the  treasurer  of  the 
Domestic  Manufacturing  Company  $1,- 
000,000  common  stock  and  $500,000  pre- 
ferred stock.  Still  later,  Jones  agrees 
with  the  Domestic  Manufacturing  Com- 
pany to  surrender  $1,000,000  preferred 


stock  and  to  take  in  lieu  thereof  $l,00u,- 
000  common  stock.  Jones  makes  a  fur 
ther  agreement  with  the  Domestic  Manu 
facturing  Company  to  deliver  to  it  all  the 
stock  in  the  Blank  Manufacturing  Com- 
pany, appraised  at  $350,000,  and  to  pay 
the  Domestic  Manufacturing  Company 
$150,000,  for  which  he  is  to  receive  $500,- 
000  of  preferred  stock  of  the  Domestic 
Manufacturing  Company. 

Illustrate  by  journal  entries  the  neces- 
sary accounts  to  be  opened  on  the  books 
of  the  Domestic  Manufacturing  Company 
to  show  each  step  taken  in  the  foregoing 
agreement. 


PRACTICAL  PROBLEMS,  GRADED,    SERIES  B 


Code  :    Encore 


"A*'  and  "B"  are  partners  and  share 
profits  in  proportion  to  their  capital  in- 
vested. "C,"  "D"  and  "E"  are  partners, 
having  equal  interest  in  the  business.  A 
balance  sheet  from  the  books  of  "A"  and 
"B"  is  as  follows : 

ASSETS  : 

Accounts  Receivable  :. $  2,500.00 

Cash  in  Bank  1,000.00 

Merchandise  as   per  inventory 2,500.00 

$  6,000.00 

LIABILITIES  : 

Accounts    Payable   $  1,200.00 

"A's"    Investment    1,500.00 

"BV  Investment  ..._ _ 2,000.00 

Bills    Payable    500.00 

Undivided   Profits   800.00 

$  6,000.00 

"C,"  "D"  and  "E"  kept  no  books,  but 
have  the  following  assets  and  liabilities: 

ASSETS : 

Cash  in  Bank  $     800.00 

Accounts  Receivable  3,000.00 

Merchandise  as  per  inventory 3,000.00 


Real  Estate— Warehouse  1,200.00 

$  8,000.00 

LIABILITIES  : 

Mortgage  on  Real  Estate 4     500.00 

Accounts  Payable  300.00 

$     800.00 

"A''  and  "B"  arrange  with  "C,"  "D" 
and  "E"  to  form  a  corporation  with  a 
capital  stock  of  $15,000.00.  The  cor- 
poration to  assume  all  assets  and  liabil- 
ities of  both  partnerships.  Each  partner- 
ship agrees  that  a  reserve  of  10%  against 
accounts  receivable  shall  be  created  and 
charged  against  their  individual  partner- 
ship holdings  prior  to  the  consolidation. 

The  entire  capital  stock  is  to  be  allotted 
to  "A,"  "B,"  "C,"  "D"  and  "E,"  in  pro- 
portion to  their  partnership  holdings. 

The  organization  expense  paid  by  the 
new  company  was  $200.00. 

Make  a  balance  sheet  for  the  new  com- 
pany, and  give  each  of  the  aforesaid  part- 
ners his  allotment  of  shares. 


'• 


PRACTICAL  PROBLEMS,  GRADED,   SERIES  B 


Code:    Encumber 

The  following  figures  are  taken  from  Me  books  of  a  firm  as  at 
December  31,  1912: 

.    Accounts  Receivable   $27,850.00 

Merchandise  Inventory 9,750.00 

Furniture  and  Fixtures 2,250.00 

Plant  and  Machinery 20,000.00 

Investments — Schedule  I   24,000.00 

Investments — Schedule  II   17,500.00 

Accounts  Payable 48,000.00 

Bills  Payable 45,000.00 

On  January  1,  1913,  a  corporation  was  formed  to  take  over  the 
business  but  the  investments  listed  in  Schedule  II  were  retained  by  the 
partners. 

10,000  out  of  25,000  shares  of  Common  Stock  of  the  par  value  of 
$5.00  each  were  issued  to  the  vendors  as  fully  paid  and  5,000  shares 
were  issued  for  cash. 

9,000  out  of  25,000  shares  of  6%  Preferred  Stock  of  the  par  value 
of  $5.00  each  were  given  in  payment  of  the  Bills  Payable  of  $45,000. 

Prepare  statement  showing  the  position  of  the  firm's  accounts  upon 
the  formation  of  the  corporation,  the  opening  journal  entries  on  the 
books  of  the  new  company,  and  a  Balance  Sheet  for  the  company  after 
formation,  dealing  with  any  difference  according  to  your  judgment. 


PRACTICAL  PROBLEMS,  GRADED,    SERIES  B 


Code  :    Endear 

A  corporation  took  over  the  business 
of  an  individual  whose  books  showed  him 
to  be  worth  $125,000,  for  the  sum  of 
$200,000,  payable  $50,000  in  bonds,  $50,- 
000  in  preferred  stock,  $50,000  in  com- 
mon stock  and  the  remainder  in  cash. 
The  capital  of  the  company  was  $100,000 
preferred  stock  and  $100,000  common 
stock.  The  balance  of  the  stock  was  sub- 
scribed for  and  bonds  were  issued  for 
$100,000.  According  to  the  subscriptions 
the  stock  was  to  be  paid  in  as  follows: 
10%  on  application,  40%  in  30  days  after 
allotment    and    50%     in    three    months 


thereafter.  On  the  bonds  10%  was  to  be 
paid  on  application  and  the  balance  in  30 
days  after  allotment. 

Make  the  necessary  journal  entries  on 
the  books  of  the  company  to  cover  these 
transactions  in  accordance  with  the  state- 
ment following: 

Property  and  plant  $  75,000 

Raw   material   25,000 

Unfinished  orders  15,000 

Accounts  receivable  25,000 

Cash   10,000 

Accounts   payable  $  25,000 

Make  journal  entries  closing  the  books 
of  the  individual  vendor. 


PRACTICAL  PROBLEMS,  GRADED,   SERIES  B 


Code:  Endeavor 

"A"  is  the  owner  of  a  business  with  property  valued  as  fol- 
lows: 

Real  Estate  and  Buildings $100,000 

Machinery  and  Tools 79,000 

Stock  in  Trade 93,500 

$272,500 

"A,"  "B,"  "C,"  "D"  and  "E"  organize  a  corporation  ("F") 
with  an  authorized  capital  of  $350,000,  divided  into  3,500  shares  of 
$100  each,  under  the  following  conditions: 

**A"  receives  2,725  fully-paid  shares  for  his  prop- 
erty as  above. 

"B"  subscribes  for  100  shares. 

"C"  subscribes  for  100  shares. 

"D"  subscribes  for  100  shares. 

"E"  subscribes  for  125  shares. 

100  shares  are  placed  in  the  treasury  for  future  disposition, 
and  50  shares  of  fully  paid  stock  are  given  to  each  incorporator 
for  the  cash  payment  of  10%  of  par  value,  in  consideration  of 
services  in  the  organization  of  the  company.  Each  incorporator 
then  donates  30  shares  to  the  company  for  sale  to  provide  work- 
ing capitaf. 

Draft  the  necessary  opening  entries  for  corporation  "F," 
giving  effect  to  the  above  transactions,  and  prepare  resulting 
trial  balance.         ^ 


PRACTICAL  PROBLEMS,  GRADED,   SERIES  B 


CuDE :    Ending 

The  Patent  Specialty  Company  was 
organized  July  1.  1907,  with  a  capital  of 
$100,000,  to  manufacture  novelties.  The 
following  transactions  occurred : 

July  1,  1907,  one-half  of  the  capital 
stock  was  subscribed  and  issued,  10% 
being  called  and  paid  on  that  date  in 
cash.  Legal  and  other  incorporation  ex- 
penses, amounting  to  $500,  were  paid. 

August  20,  1907,  patent,  covering 
novelty,  was  purchased  for  $50,000,  pay- 
able one-half  in  stock  and  one-half  in 
cash ;  the  stock  was  issued  and  delivered, 
$2,000  paid  in  cash  and  note  given  for 
balance,  due  in  one  month,  6%  interest. 
The  patent  was  subject  to  royalty  rights 
granted  to  the  novelty  company,  which 
terminated  at  date  of  purchase.  All  ac- 
rued  royalties  were  to  pass  with  patent 
and  no  royalty  rights  were  granted  by  the 
Patent  Specialty  Company. 


August  27,  1907,  the  village  Board  of 
Trade  donated  a  lot,  valued  at  $5,000,  in 
consideration  of  agreement  to  erect  and 
equip  a  plant  at  a  cost  of  not  less  than 
$25,000. 

September  13,  1907,  a  further  call  of 
70%  was  paid.  The  note  was  paid  a* 
maturity. 

December  31,  1907,  the  following  factf 
existed : 

Payments  on  account  of  salaries,  in- 
terest, insurance,  etc.,  amounted  to 
$2,250,  with  $250  accrued ;  contracts  for 
construction  and  equipment  amounting  to 
$35,000  had  been  given  which  were  75% 
completed  and  40%  paid;  royalties 
amounting  to  $2,725  had  been  received 
and  $190.00  was  accrued. 

Prepare  journal  entries  to  cover  fore- 
going, and  statement  to  display  financia; 
condition  at  December  31,  1907. 


PRACTICAL  PROBLEMS,    GRADED,    SERIES   B 


Code:  Endure 


"A."  and  "B."  were  partners  trading 
under  the  name  of  the  "A."  ''B."  &  Co. 
June  30,  1908,  the  following  balances 
appear  on  their  ledger: 

"A",  Capital  account  $  70,000.00 

"B",  Capital  account  50,000.00 

Real   Estate  22,000.00 

Buildings    20,000.00 

Machinery  &  Tools  44,000.00 

Furniture  &   Fixtures   2,000.00 

Accounts  Rec 50,000.00 

Cash    7,000.00 

Material  &  Mdse 53,000.00 

Accounts    Payable 35,000.00 

Bills  Payable  48,000.00 

Bills   Rec 5,000.00 

On  June  30,  1908,  the  business  is  in- 
corporated as  the  "X"  Co.,  on  the  follow- 
ing plan : 

1.  Capital  Stock,  $150,000.00. 

2.  "X"  Company  takes  over  the  entire 
assets  and  liablities  of  "A."  "B."  &  Co. 
at  the  book  figures  as  above,  except  (a) 
real  estate  of  the  book  value  of  $5,000.00, 
which  is  retained  by  "A."  "B."  &  Co.; 
(b)  the  accounts  receivable,  which  are 
taken  over  at  $48,000.00,  and  (c)  the 
capital  accounts  of  the  partners. 


3.  "X"  Company  pay  ''A."  "B."  &  Co. 
$30,000.00  for  the  goodwill  of  the  busi- 
ness. 

4.  Payment  to  "A."  "B."  &  Co.,  is 
made  as  follows:  $50,000.00  in  first 
mortgage  bonds,  and  the  balance  in  capi- 
tal stock  of  the  "X"  Co. 

5.  After  paying  off  "A."  "B."  &  Co. 
the  remainder  of  the  capital  stock  is  sold 
for  cash  to  sundry  persons. 

The  real  estate  which  was  retained  by 
A."  "B."  &  Co.  is  bought  from  "A." 
B."  &  Co.  by  "A."  for  $7,000.00  and  is 
to  be  charged  to  "A.'s"  capital  account. 

After  the  completion  of  the  above  de- 
scribed transactions  "A."  and  ''B."  dis- 
solve partnership. 

You  are  required:  (a)  to  prepare  clos- 
ing entries  for  the  books  of  "A."  "B."  & 
Co.,  (b)  a  statement  setting  forth 
the  partners'  accounts  down  to  their 
final  closing,  beginning  with  the  balances 
shown  by  the  books  on  June  30,  1908; 
(c)  opening  entries  of  the  "X"  Co. 


<< 


a 


1l 


»  . 


PRACTICAL  PROBLEMS,   GRADED,    SERIES  B 


Code  :     Enemy 

"A"  obtained  a  franchise  to  operate  a  street  car  system  for 
14  years.  He  sold  it  to  a  syndicate  for  $25,000.00;  paid  in 
$5,000.00  as  capital,  and  was  appointed  manager  at  $2,500.00 
per  annum. 

"B"  patented  a  new  motor  (rights  for  10  years),  which  was 
taken  over  and  for  which  he  was  credited  by  the  syndicate  with 
$10,000.00.     He  was  appointed  engineer  at  $2,000.00  per  annum. 

"C"  brought  in  the  rest  of  the  capital  required,  $225,000.00. 

The  tracks  and  right-of-way  cost  $125,000.00  and  the  plant 
and  rolling  stock,  $60,000.00. 

It  was  agreed  to  write  off  10%  of  the  former  each  year,  and 
to  consider  the  life  of  the  latter  as  10  years. 

After  providing  for  repairs  and  renewals,  but  excluding  tht 
salaries  of  the  manager  and  engineer  (which  were  paid)  and  all 
depreciation,  the  profits  of  the  first  seven  years  averaged 
$40,000.00  per  year.  "C"  was  entitled  to  three-fourths  of  the 
balance,  and  "A"  and  "B"  to  the  remainder  in  equal  shares. 

Draw  up  a  balanced  statement  showing  the  position  of  the 
capital  accounts  at  the  end  of  seven  years,  assuming  no  debits  for 
drawings  and  no  credits  for  interest. 


PRACTICAL  PROBLEMS,    GRADED,    SERIES  B 


Code  :     Energetic 

Method  &  Practice,  who  are  equal  partners,  carry  on  busi- 
ness as  manufacturers,  and  their  position,  as  stated  in  their  balance 
sheet,  at  December  31,  1910,  is  as  follows: 

ASSETS  LIABILITIES 

Merchandise $  14,000.00        $ 

Machinery  and  Plant  _ 6,000.00 

Office  Furniture  500.00 

Book  Debts  20,000.00 

Life  Insurance  Policy  on  Joint  Lives,  surrender 

value  2,500.00 

Leasehold  Property  7,500.00 

A.  M.  Methcd,  Drawing  Account 3.000.00 

B.  D.  Practice,  Drawing  Account 1.000.00 

Profit  and  Loss  Account 5,500.00 

Sundry  Creditors  18,500.00 

Overdraft  at  Bank  9,500.00 

Bills  Payable 3,500.00 

A.  M.  Method,  Capital  Account 11,000.00 

B.  D.  Practice,  Capital  Account •    17,500.00 

$    60,000.00       $    60,000.00 


The  business  is  carried  on  until  June  30,  1911,  by  which  time 
a  net  profit  of  $4,100.00  has  been  made  for  the  half  year,  after 
5%  has  been  written  off  leaseholds.  Meanwhile  Sundry  Creditors 
have  been  reduced  by  $4,000.00,  Bills  Payable  by  $975.00  and 
Overdraft  by  $1,000.00,  and  partners  have  withdrawn  $1,000.00 
each  during  the  half  year. 

Merchandise  now  stands  at  $15,100.00,  Book  Debts  at  $15,- 
400.00,  and,  subject  to  any  necessary  alterations,  the  other  items 
remain  as  at  December  31,  1910. 

In  September,  1911,  the  firm  agrees  to  sell  the  business  to 
a  corporation  upon  the  basis  that  Merchandise  shall  be  taken 
over  at  a  discount  of  5%,  and  Book  Debts  at  a  discount  of  2i/2% 
as  at  June  30th,  the  corporation  paying  $2,500.00  for  profits  in 
the  interval,  less  $500.00  each,  withdrawn  by  partners  since  June, 
the  partners  to  retain  and  surrender  the  life  insurance  policy,  and 
the  corporation,  with  these  exceptions,  taking  over,  on  the  basis 
of  the  balance  sheet  at  June  30th,  and  agreeing  to  pay  a  goodwill 
of  $12,500.00.  The  purchase  money  is  to  be  paid:  (a),  by  the 
discharge  of  the  firm's  liabilities  of  $25,000.00;  (b),  by  $5,000.00 
in  cash;  and,  (c),  by  the  issue  to  the  partners  of  $5.00  preferred 
shares  to  satisfy  any  balance  due  to  them  respectively. 

Disregarding  interest  on  drawings  and  capital,  you  are  re- 
quired to  prepare : 

( 1 ) ,     A  Realization  Account ; 

(2),  A  Capital  Account  with  each  partner  showing  the 
final  settlement; 

(3),     Opening  Balance  Sheet  of  the  new  corporation. 


PRACTICAL  PROBLEMS,    GRADED,    SERIES  B 


Code:    Energy 

Jones  &  Brown,  partners,  decided  to  incorporate  on  Decem- 
ber 31,  1904.     At  that  date  their  balance  sheet  was  as  follows: 

ASSETS : 

Real  Estate  and  Improvements $25,000 

Bills  and  Accounts  Receivable 30,000 

Inventory   20,000 

Cash  2,500    $77,500 

LIABILITIES: 

Bills  and  Accounts  Payable $33,500 

Jones,  Capital  Account  22,000 

Brown,  Capital  Account 22,000    $77,500 


A  corporation  (The  Jones-Brown  Co.)  was  organized  with 
a  capital  stock  of  $100,000.  It  entered  into  an  agreement  with 
Jones  &  Brown  whereby  it  was  to  take  over  all  the  assets,  and 
assume  all  the  liability  on  bills  and  accounts  payable,  at  the  above 
figures,  except  that  the  real  estate  and  improvements  were  to  be 
taken  over  at  $35,000,  and  that  $31,000  was  to  be  paid  Jones  & 
Brown  for  the  goodwill  of  the  business.  The  entire  payment  to 
Jones  &  Brown  was  to  be  made  as  to  $5,000  in  cash  and  $80,000 
in  stock. 

Cash  subscriptions  for  stock  were  received  as  follows : 

From  Smith   $  5,000 

Robinson   10,000 

Jenkins   5,000 

Prepare  (1)  journal  entries  of  the  above  transactions  for 
the  books  of  the  corporation,  assuming  that  the  capital  stock  has 
been  issued  as  stated;  (2)  balance  sheet  of  the  corporation  after 
making  the  entries,  and  (3)  journal  entries  to  close  the  books  of 
the  Jones  &  Brown  partnership. 


PRACTICAL  PROBLEMS,    GRADED,    SERIES  B 


Code:  Enforce 


A  corporation  organizes  under  the  laws 
of  Michigan  to  conduct  a  manufacturing 
business.  Authorized  capital,  $400,- 
000.00,  half  each  common  and  preferred 
stock;  shares  $100.00.  Five  incorporators 
each  subscribe  for  ten  shares  of  common 
stock  at  face  value.  John  Smith  purchases 
from  three  manufacturing  companies 
their  complete  plants  for  $395,000.00  and 
transfers  said  plants  to  the  incorporated 


company  for  the  remaining  $395,000.00 
of  common  and  preferred  stock  and 
$150,000.00  of  first  mortgage  5%  bonds 
out  of  a  total  issue  of  bonds  of  $200,- 
000.00,  leaving  $50,000.00  of  bonds  in  the 
treasury. 

Make  opening  journal  entries  and  trial 
balance  showing  the  company's  condition 
after  the  transaction. 


PRACTICAL  PROBLEMS,    GRADED,    SERIES   B 


Code:  Engaged 


Brown  and  Jones  have  dry  goods 
stores  near  each  other.  They  decide  that 
by  amalgamating  their  businesses  and 
forming  a  joint  stock  company  they  can 
do  a  larger  and  more  profitable  business 
at  less  expense.  Both  have  kept  their 
books  by  single  entry.  You  are  called  in 
to  give  the  necessary  statements  to  en- 
able them  to  ascertain  how  they  stand  and 
to  open  the  books  of  the  Brown-Jones 
Company,  Limited.  You  find  the  follow- 
ing accounts  in  the  ledgers,  viz. : 

BROWN'S  LEDGER 

BALANCES   AS   AT   AUGUST   1,   1909. 

Cash  on  hand  $  250.00    $ 

Bank   Balance   5,400.00 

Cash   Sales  10,000.00 

Book  debts  25,000.00 

Bills  receivable  3,000.00 

Store  and  land  30,000.00 

Fixtures  2,000.00 

Wages  and  expenses 4,000.00 

Accounts  payable  6,000.00 

Bills  payable   2,550.00 

Brown's   drawings  10,000.00 

Freight,  duty  and  cart- 
age     8,000.00 

Inventory  of  goods 8,700.00 

Unexpired    insurance ..  •200.00 


JONES'  LEDGER 

BALANCES    AS    AT    AUGUST    1,    1909. 

Cash  on  hand  $  100.00    $ 

Bank    balance    3,500.00 

Cash   sales   12,000.00 

Stores  and  land  25,000.00 

Fixtures   1,500.00 

Wages    2,000.00 

Jones'  personal  account  6,000.00 

Expenses    1,500.00 

Book    debts    15,000.00 

Bills   receivable  1,000.00 

Freight,  duty  and  cart- 
age    5,000.00 

Accounts  payable  5,000.00 

Bills   payable   3,000.00 

Inventory  of  goods 5,800.00 

Unexpired  insurance 100.00 

The  capital  of  the  company  is  to  be 
$150,000.00,  in  shares  of  $100.00  each,  of 
which  Brown  is  to  take  $70,000.00  and 
Jones  $50,000.00.  If  the  capital  invested 
in  the  business  of  either  exceeds  these 
sums,  they  are  to  receive  the  surplus 
in  cash,  but  if  it  is  less,  they  are  to 
pay  in  the  difference  in  cash.  The  bal- 
ance of  the  stock  is  subscribed  and  paid 
for  in  cash. 

Make  necessary  changes  in  Brown's 
and  Jones'  ledger  balances  to  show  stand- 
ing of  firms  and  capital  invested,  and  give 
trial  balance  from  company's  ledger  after 
opening  entries  have  been  made. 


PRACTICAL  PROBLEMS,    GRADED,    SERIES  B 


Code:    Enhance 

On  December  31,  1909,  the  Trial  Balance  of  the  Motor  Sales 
&  Engineering  Co.,  Inc.,  was  as  follows : 

DEBITS  CREDITS 

Common  Stock,  5,000  shares $  $    25  000  00 

Mortgage  sioOO.OO 

Goodwill  10,000.00 

Real  Estate  7,500.00 

Machinery  and  Tools  '  500.00 

Fixtures  and  Fittings  100.00 

Hire  Cars  2  500.00 

Sundry  Accounts  Receivable  12,500.00 

Stock  of  Accessories,  Tires,  Oil,  etc.,  at  Decem- 

her  31,  1909 1,250.00 

Cash  at  Bank 5,275.00 

Sundry  Creditors 755  qq 

Reserve  for  Bad  Debts  (Dec.  31,  i908) .'ZZ  40000 

Accessories,  including  tires  and  tubes  (used)....       10,000.00 

Oil,  Gasoline,  etc.  (used) 2,750.00 

Cost  of  Repairing  Cars,  Wages  and  Material 3750.00 

Charges  to  Customers  for  Repairing  Cars 400000 

Expenses  of  Hire  Cars 1,000.00  ' 

Wages  (Yardmen,  etc.)  600.00 

Charges  to  Customers  for  Hire  Cars 1  650.00 

Sales  of  Accessories,  including  Tires  and  Tubes  1325000 

Cars  Purchased  for  Resale _ 55,000.00 

Sales  of  Oil,  Gasoline,  etc 3  75000 

Sundry  Receipts  (Washing  Cars,  Charging  Bat- 

^     ^^fs)    425.00 

Car  bales  _ ^  000.00 

Management  Expenses  2,250.00 

Garage  Rents   225  00 

Repairs  to  Plant 90.00 

Bad  Debts  written  off 250.00 

Freight  on  Cars  Sold  400.00 

Mortgage  Interest  to  December  31,  1909. 250.00 

Common  Shares  Dividend  to  Dec.  31,  1908 2,500.00 

Profit  and  Loss  Dec.  31,  1908 400000 

$  118,465.00     J  118,465.00 

Depreciation  to  be  written  off  Machinery  and  Tools  at  the 
rate  of  20%  per  annum;  Fixtures,  10%;  Hire  Cars,  25%.  The 
Reserve  for  Bad  Debts  is  to  be  increased  to  5%  on  the  Sundry 
Debtors  and  25%  of  the  Net  Profits  for  the  year  is  to  be  reserved 
for  commissions  to  the  manager. 

Prepare  complete  statements  in  the  form  which,  in  your 
opinion,  is  calculated  to  give  at  a  glance  the  greatest  amount  of 
information  to  the  directors  as  to  the  working  results  of  the 
business. 


PRACTICAL  PROBLEMS,  GRADED,    SERIES  B 


Code  :   Entire 

"A"  pays  "X"  $2,000.00  for  the  right  to  subscribe  for 
$10,000.00  worth  of  stock  in  the  "M"  Co.  at  par.  Prior  to  the 
issuance  of  the  stockholders'  rights,  the  "M"  Co.  had  a  capital 
stock  of  $100,000.00  and  a  surplus  of  $40,000.00  To  what  amount 
is  the  "M"  Co.  increasing  its  capital  stock,  provided  "A"  is  paying 
the  true  worth  of  the  "right"  as  determined  from  the  books  of  "M"  ? 


Code  :    Entrench 

On  May  31,  1905,  corporation  "A"  sells  its  assets  (except 
cash)  to  corporation  *'B."  The  balance  sheet  of  corporation  "A" 
is  as  follows: 

ASSETS: 

Real  Estate,  Buildings,  Machinery  and  Furniture ^0,000 

Merchandise  Inventory  15,000 

Bills  and  Accounts  Receivable  20,000 

Cash 5,000 

$80,000 

LIABILITIES : 

Capital  Stock— 500  shares  of  $100. - $50,000 

Bills  and  Accounts  Payable  25,000 

Undivided  Profits  5,000    $80,000 

The  selling  price  to  corporation  "B"  is  $100,000;  $50,000 
being  payable  in  cash  and  $50,000  in  the  capital  stock  of  corpora- 
tion "B." 

On  completion  of  the  sale  to  corporation  "B,"  corporation 
"A"  pays  its  bills  and  accounts  payable,  distributes  the  assets  then 
remaining,  to  its  stockholders  pro  rata  and  dissolves. 

Prepare  journal  entries  for  corporation  "A,"  covering  the 
above  transactions  and  closing  out  corporation  "A's"  books ;  also 
state  how  much,  (a)  in  cash,  (b)  in  stock  of  corporation  "B," 
each  share  of  corporation  "A"  is  entitled  to  in  the  final  distribu- 
tion. 


PRACTICAL  PROBLEMS,  GRADED,    SERIES  B 


Code  :     Envious 

The  Randolph  and  Madison  Novelty  Co.  manufactured  the 
"Shriek"  automobile  horn  and  as  a  side  line  also  manufactured 
the  "Handy"  trouble  lamp.  It  was  a  very  profitable  business 
until  a  new  horn  was  put  on  the  market  which  was  received  with 
such  favor  by  the  public  that  it  was  no  longer  possible  to  sell  the 
"Shriek."  The  company  was  very  soon  in  difficulties,  and  a 
receiver  was  applied  for  on  Oct.  31,  1916,  at  which  time  the  books 
showed  as  follows : 

Land  and  Building  at  cost $  35,000.00    $ 

Machinery  and  Equipment  at  depreciated  value 25,000.00 

Inventory  of  Raw  Material  and  Supplies  30,000.00 

Inventory  of  Finished  Stock  60,000.00 

Accounts  and  Notes  Receivable — 

Good  15,000.00 

Doubtful  15,000.00 

Bad  7,000.00 

Deferred  Charges — Adv.  Campaign  30,000.00 

Unexpired   Insurance  350.00 

Bank  Loans  30,000.00 

Other  Notes  Payable 40,000.00 

Mortgage  Loan  on  Real  Estate  20,000.00 

Accounts  Payable — secured 10,000.00 

Accounts  Payable — unsecured 50,000.00 

Accrued  Payroll  1,700.00 

Accrued  Interest  on  Mortgage  Loan 1,800.00 

Accrued  Interest  on  Other  Notes 

Payable  350.00 

Surplus   : 13,500.00 

Capital  Stock 50,000.00 

$217,350.00    $217,350.00 


The  land  and  buildings  have  appreciated  and  now  have  a 
market  value  of  $40,000.00,  but  the  machinery  and  equipment 
would  have  very  little  value  to  any  other  concern,  and  it  is  esti- 
mated •  that  it  cannot  be  sold  for  more  than  scrap  value  of 
$5,000.00.  The  inventory  of  raw  material  and  supplies  has  in- 
creased because  of  a  rise  in  the  market,  and  it  is  expected  to 
bring  $35,000.00,  but  the  finished  stock  can  be  sold  only  at  barg-ain 
prices  and  will  probably  bring  not  more  than  $10,000.00.  It  is 
estimated  that  $2,500.00  will  be  realized  on  the  doubtful  accounts 
and  nothing  on  the  accounts  classified  as  bad.  If  cancelled  at 
the  short  rate,  the  insurance  policies  will  bring  $300.00. 

An  oflFer  has  been  received  to  purchase  the  exclusive  rights 
to  the  trade  name  "Handy"  trouble  lamp  for  a  consideration  of 
$3,000.00. 

The  bank  loan  is  secured  by  the  deposit  of  warehouse  re- 
ceipts covering  all  of  the  raw  material  and  supplies,  and  the 
secured  accounts  payable  creditors  have  received  assignments 
of  accounts  receivable  of  an  equal  face  value  and  will  be  fully 
satisfied  from  the  collections  thereon. 

Prepare  a  Statement  of  Affairs  and  a  Deficiency  Account  for 
submission  to  the  creditors  and  stockholders. 


PRACTICAL  PROBLEMS,    GRADED,    SERIES  B 


Code  :    Environ 

A  manufacturing  company  organized  for  the  purpose  of 
marketing  timber  products  acquired  certain  timber  lands  and 
water  rights  for  a  relatively  nominal  cash  consideration.  In 
addition  to  its  cash  disbursement  in  this  connection  it  also  issued 
''for  services  in  procuring  properties"  $1,000,000.00  of  its  common 
stock.  Of  this  issue  $500,000.00  of  the  stock  was  donated  back 
to  the  company  at  a  later  date  and  credited  to  its  surplus  account. 
Against  the  credit  to  surplus  of  $500,000.00  the  sum  of  $300,- 
000.00  was  charged  during  1912  and  1913  covering  the  issuance 
of  that  much  of  the  donated  common  stock  as  a  bonus  in  connec- 
tion with  preferred  stock  sold.  The  company  passed  from  the 
construction  and  development  stage  to  a  period  of  actual  operat- 
ing as  from  January  1,  1914,  and  at  the  date  of  your  examination 
of  its  books,  for  the  year  1915,  you  have  found  that  the  surplus 
at  December  31,  1915,  amounts  to  $320,000.00.  This  amount 
consists  of  the  following  figures : 

Balance  of  donated  common  stock  $200,000.00 

Profit  from  operations  for  1914  (before  providing  for  deprecia- 
tion)      70,000.00 

Profit  from  operations  for  1915  (before  providing  for  deprecia- 
tion)      120,000.00 

$390,000.00 
Less  dividend  on  preferred  stock  for  1914  and  1915  declared  and 
paid,  being  at  the  rate  of  7%  on  $500,000.00  preferred  stock 
outstanding  during  both  years : 70,000.00 

$320,000.00 

The  remaining  donated  common  stock  is  held  by  the  com- 
pany and  is  carried  on  its  books  at  the  debit  of  Treasury  Stock 
Account,  $200,000.00. 

You  have  been  informed  that  no  more  of  the  treasury  stock 
will  be  given  as  a  bonus  in  disposing  of  the  remaining  preferred 
stock,  of  which  the  authorized  issue  was  $750,000.00  Officials 
of  the  company  have  told  you  that  (since  the  operations  have 
been  successful ),  if  the  treasury  common  stock  is  disposed  of  at  all 
it  will  not  be  sold  at  less  than  par. 

All  of  the  authorized  issue  of  common  stock,  $2,000,000.00, 
is  credited  to  the  capital  stock  account  in  the  books  and  has 
been  issued. 

Under  these  circumstances,  you  are  asked  to  indicate,  so  far 
as  the  capital  liabilities  and  surplus  of  the  company  are  con- 
cerned, how  the  figures  mentioned  herein  should  properly  be  set 
forth  on  the  balance  sheet,  bearing  in  mind  that  you  have  audited 
the  books  only  for  the  year  1915,  although  you  have  (for  your 
own  protection )  made  a  general  audit  of  the  charges  to  the  capital 
assets  of  the  company  since  its  inception  and  have  made  a  suffi- 
cient scrutiny  of  the  surplus  account  to  justify  your  assumption 
that  the  figures  stated  for  the  surplus  prior  to  January  1,  1915, 
are  correctly  stated  as  herein  indicated. 

A  further  consideration  is  that  you  may  qualify  your  certifi- 
cate to  the  balance  sheet  in  whatever  respect  you  may  consider 
necessary.  The  only  object  of  this  question  is  to  ascertain  if 
you  know  how  the  surplus  and  the  capital  liabilities  should  be 
set  forth  on  the  face  of  the  balance  sheet  so  that  they  will,  so 
far  as  reasonably  possible,  be  self-explanatory. 


PRACTICAL  PROBLEMS,  GRADED,    SERIES  B 


Code  :     Envisage 

The  following  are  the  Trial  Balance  of  the  books  of  Messrs. 
Strong  &  Short,  as  at  December  31,  1916,  and  their  Balance 
Sheet  as  at  the  same  date,  prepared  from  the  accompanying  Trial 
Balance  and  certain  other  information. 

The  last  previous  closing  of  the  books  was  at  December 
31,  1915. 

From  this  information  prepare  a  Profit  and  Loss  Account 
for  the  year  1916. 

DEBITS  CREDITS 

Light  and  Water  $  255.00       $ 

Sundry  Expenses  775.00 

Traveling  Expenses  1,555.00 

Discounts  Received  on  Purchases 1,510.00 

Discounts  Allowed  to  Customers 1,365.00 

Fuel  690.00 

Insurance    425.00 

Postage,  Telegrams  and  Stationery 520.00 

Exchange   ---.  1,820.00 

Repairs    to    Plant    (and    purchase    of    Repairs 

Stores)   3,770.00 

Freight  and  Cartage  2,805.00 

Stable  Expenses  670.00 

Bad  Debts  2,095.00 

Audit  Fee  210.00 

Bills  Payable  78,440.00 

Bills  Receivable  1,080.00 

Plant  and  Machinery  19,090.00 

Purchases  67,095.00 

Sales                148,040.00 

Salaries  and  Wages 21,790.00 

Rent  and  Taxes  1,235.00 

Buildings   14,535.00 

Merchandise  Stock,  Dec.  31,  1915  (there  were 

no  Repair  Stores  on  hand) 87,700.00 

Bad  Debt  Reserve,  Dec.  31,  1915 3,895.00 

Cash  on  Hand  795.00 

Sales  Ledger  76,160.00 

Purchase  Ledger  13,635.00 

A.  Strong,  Capital  Account,  Dec.  31,  1915  (in- 
terest for  1916,  $2,030.00) 40,620.00 

K.  Short,  Capital  Account,  Dec.  31,  1915   (in- 
terest for  1916,  $1,350.00) 27,055.00 

A.  Strong,  Drawing  Account  —- 3,800.00 

K.  Short,  Drawing  Account - 2.960.00 

$  313,195.00       $  313,195.00 


(Continued  on  next  page.) 


PRACTICAL  PROBLEMS,  GRADED,   SERIES  B 


Code:     Envisage — (Continued) 

STRONG  &  SHORT  BALANCE  SHEET 

December  31,  1916. 

ASSETS 

Cash  on  Hand $ 

Accounts  Receivable — 

Open  Accounts  as  per  Sales  Ledger $    76,160.00 

Less — Reserve  for  Discounts  3%.. ..$2,280. 00 

Reserve  for  Bad  Debts 4,000.00        6,280.00 


Bills  Receivable 


$    69,880.00 
1,080.00 


Merchandise  Stock $    75,500.00 

Repairs  Stores  1,250.00 


Plant  and  Machinery,  per  last  Balance  Sheet $     19,090.00 

Less — Depreciation   5%   955.00 


Buildings,  per  last  Balance  Sheet $    14,535.00 

Less — Depreciation  2%%  365.00 


Insurance  Paid  in  Advance 


LIABILITIES 
Accounts  Payable — 

On  Open  Accounts,  per  Sales 

Ledger $13,635.00 

Less — Reserve  for  Discounts, 
2%%  340.00 


$    13,295.00 


Sundries — 

Salaries  and  Wages $  1,160.00 

Gas  and  Water 50.00 

Freight  and   Cartage 1,625.00 

Rent  and  Taxes 375.00 

Stable  Expenses  60.00 


Bills  Payable  

Capital  Accounts— A.  Strong  $    49,675.00 

K.  Short  36,270.00 


795.00 


70,960.00 

76.750.00 

18,135.00 

14,170.00 

140.00 

$  180,950.00 


3,270.00       $ 


16,565.00 
78,440.00 
85,945.00 


$  180,950.00 


PRACTICAL  PROBLEMS,  GRADED,    SERIES  B 


Code:    Envoy 

The  Licking  L.ight  &  Power  Co.  was  organized  on  June  30, 
1910,  with  an  authorized  capital  of  $300,000,  consisting  of  2,000 
shares  of  common  stock,  par  value  $100  each,  and  1,000  shares 
of  5%,  cumulative  preferred  stock,  par  value  $100  each.  On 
the  same  date  the  company  authorized  an  issue  of  5%,  sinking 
fund,  gold  bonds,  in  the  sum  of  $300,000. 

On  July  1,  1910,  the  company  acquired  all  of  the  capital  stock 
of  the  Citizens  Electric  Light  &  Power  Company  and  the  Newark 
Light  &  Power  Company,  for  the  following  consideration :  $5,000 
in  cash,  800  shares  of  preferred  stock,  1,700  shares  of  common 
stock,  and  $100,000,  par  value,  of  bonds. 

After  making  this  purchase,  the  company  had  $35,000  in 
cash  and  held  in  reserve  $20,000  par  value  of  preferred  stock, 
and  $140,000  par  value  of  bonds. 

No  further  sales  of  stocks  or  bonds  were  made  during  the 
first  fiscal  year,  and  on  June  30,  1911,  after  the  necessary  adjust- 
ments had  been  made,  the  following  facts  and  figures  were 
ascertained : 

Cash  in  Banks  $15,198.79 

Accounts  Receivable  15,435.65 

Materials  and  Supplies -...    1,593.22 

Unexpired  Insurance  207.86 

Accounts   Payable  .■. 177.75 

Meter  Deposits  2,121.50 

Accrued  Taxes  ~ 805.20 

Improvement  Expenditures  18,577.21 

Sinking  Fund  2,000.00 

Net  Earnings - 16,908.28 

Interest  on  Bonds  8,000.00 

Make  the  necessary  journal  entries  to  open  the  books  of 
the  company  on  July  1,  1910,  and  prepare  a  balance  sheet  dated 
June  30.  1911. 


PRACTICAL  PROBLEMS,  GRADED,    SERIES  B 


Code  :    Epigram 

An  Investment  Company  purchased  for  investment  $100,- 
000.00  6%  10-year  municipal  debentures  at  96,  and  $200,000.00 
5%  industrial  bonds,  fifteen  years  to  run,  at  104.  How  would 
you  treat  the  discount  and  the  premium  in  the  accounts.  Give 
journal  entries. 


PRACTICAL  PROBLEMS,  GRADED,    SERIES  B 


Code  :    Eraser 

The  premises  of  a  trading  company  are  held  on  lease  for 
thirty  years.  They  were  acquired  at  a  premium,  and  large 
sums  have  been  expended  on  additions  and  improvements.  In 
the  first  ten  years  considerable  sums  have  been  set  aside  in 
the  accounts  for  leasehold  redemption  before  disclosing  to 
the  stockholders  the  profits  of  each  year,  and  the  total  amount 
so  provided  to  December  31,  1912  is  largely  in  excess  of  the 
amount  necessary  to  write  off  the  leasehold  asset  propor- 
tionately during  the  thirty  years. 

The  eleventh  year,  1913,  has  been  a  bad  year,  the  profits 
have  fallen  off  materially,  and  to  enable  the  company  to  pay 
the  customary  dividend  the  directors  determine  to  make  no 
provision  out  of  the  profits  of  that  year  for  leasehold  de- 
preciation. 

State  what  you  would  do  as  auditor,  showing  the  form 
your  action  would  take  as  regards  the  eleventh  year,  suppos- 
ing you  had  already  audited  the  accounts  for  the  previous  ten 
years. 


PRACTICAL  PROBLEMS,  GRADED,    SERIES  B 


Code  :    Erect 

A  coal  mine  is  operated  under  a  twenty-year  lease  at  a 
royalty  of  10  cents  per  ton,  but  for  which  a  minimum  payment  of 
$5,000.00  per  annum  must  be  made.  After  the  third  year  an 
arrangement  was  effected  between  the  lessor  company  and  the 
lessee  company  whereby  the  minimum  royalties  were  to  apply, 
if  in  excesF  of  the  tonnage  mined,  against  future  operations.  In 
the  first  year  25,000  tons  were  mined ;  in  the  second,  26,500 ;  in 
the  third,  24,600 ;  in  the  fourth,  31,000 ;  and  in  the  fifth,  30,500 
tons.  Journalize  these  transactions  and  state  how  the  respective 
royalties  paid  would  affect  the  Profit  and  Loss  Account  and 
Balance  Sheet. 


PRACTICAL  PROBLEMS,  GRADED,    SERIES  B 


Code  :    Eristic 

"A,"  "B"  and  "C"  form  a  partnership  January  1,  1917. 
"A"  invests  $65,000.00,  "B"  $45,000.00,  and  "C"  $40,000.00. 
Profits  are  to  be  determined  semi-annually  and  are  to  be  shared 
in  the  ratio  of  the  original  investments.  No  interest  to  be  calcu- 
lated on  Partners'  Capital  Accounts.  At  the  end  of  six  months 
the  ledger  contains  the  following  balances : 

Accounts  Receivable  $100,000.00 

Accounts  Payable 32,400.00 

Insurance   6,000.00 

Interest  Paid  _ 200.00 

Interest  Received  500.00 

Notes  Receivable  20,000.00 

Notes  Payable  20,000.00 

Purchases  600,000.00 

Purchase  Allowances  1,000.00 

Purchase   Discounts   ^.  6,000.00 

Purchase   Returns   3,000.00 

Sales    592,600.00 

Sales  Returns  2,000.00 

Sales  Allowances  500.00 

Salaries  and  Wages  30,000.00 

Rent  5,000.00 

Securities  Owned  5,000.00 

Miscellaneous  Expense 11,800.00 

Cash  25,000.00 

"A"  Capital  Account 65,000.00 

"B"  Capital  Account  45,000.00 

"C"  Capital  Account  40,000.00 

The  inventory  of  stock  on  June  30  amounted  to  $110,000.00. 

Of  the  Accounts  Receivable,  it  is  estimated  that  2%  are 
uncollectible.  During  the  six  months  the  firm  discounted 
Notes  Receivable  amounting  to  $10,000.00,  of  which  a  note 
of  $1,000.00  will  not  be  due  until  August  1. 

The  Insurance  Premiums  paid  were  for  insurance  covering 
a  three  year  period,  expiring  January  1,  1920. 

The  following  minor  bills  are  outstanding: 

Telephone  and  telegraph,  $20.00;  electric  light,  $130.00; 
dravage,  $100.00.  The  estimated  taxes  for  the  year  1917 
are '$6,800.00. 

The  Notes  Payable  are  represented  by  two  notes  of  $10,000.00 
each,  for  four  months  at  six  per  cent  interest,  dated  May  1 
and  June  1,  respectively.  The  first  note  was  discounted; 
interest  on  the  second  note  was  payable  at  luaturity. 

On  July  1,  1917,  "A"  withdraws  from  the  firm,  his  interest 
being  purchased  by  "B,"  "C"  and  "D"  in  such  proportions 
that  the  capital  of  all  partners  shall  be  equal.  It  is  agreed 
by  all  parties  that  the  value  of  the  goodwill  is  $15,000.00, 
which  has  been  created  during  the  period  of  the  partner- 
ship, and  which  amount  it  is  decided  should  be  set  up  on 
the  books. 

(a)  Construct  trial  balance  as  at  July  1 ;  (b)  Prepare  journal 
entries  indicating  the  necessary  adjustments ;  (c)  Prepare  a  profit 
and  loss  statement  for  six  months  ended  June  30;  and  (d) 
Prepare  a  balance  sheet  as  of  July  1  after  the  withdrawal  of  "A" 
and  the  entrance  of  *'D." 


PRACTICAL  PROBLEMS,  GRADED,    SERIES  B 


Code:     Ermine 

In  the  books  of  a  company,  all  accounts  affecting  profit  and 
loss  or  surplus  are  carried  in  or  transferred  to  one  account  entitled 
Surplus  Account.  This  account  shows  the  following  entries  for 
the  year  1912 : 

Dr.  Cr. 

Balance  at  January  1,  1912 $  $180,000.00 

Sales 500,000.00 

Net  book  value  of  plant  destroyed  by  fire  April  1, 

1912 , 8,000.00 

Amount  recovered  from  insurance  company  in  re- 
spect of  above  fire  9,000.00 

Manufacturing   Cost   of   Sales,   including  Material, 

Labor  and  Manufacturing  Expenses  280,000.00 

Selling  Expenses  35,000.00 

General    and    Administration    Expenses,    including 

Taxes    30,000.00 

Interest  on  Bonds 25,000.00 

Interest  received  on  bank  balances  and  customers' 

Notes  4,000.00 

Amount  appropriated  for  Employees'  Pension  Fund      7,500.00 

Bad  Debts  during  year  4,500.00 

Discount  on  Bonds   (annual  proportion)   5,000.00 

Depreciation  for  year  1912  on  plant  assets  (at  rea- 
sonable rates)  28,0(X).00 

Bonus  to  officers,  payable  only  after  payment  of  7% 

Dividend  on  Preferred  Stock 10,000.00 

Amount  applied  in  reduction  of  goodwill  100,000.(X) 

Dividends  Paid — 

Preferred  7%  35,000.00 

Common  4% 20,000.00 

Excess  Value  of  Plant  Assets  as  shown  by  appraisal 
at  December  31,  1912,  over  the  book  value  at 
that  date  of  the  properties  appraised 140,000.00 

Balance  at  December  31,  1912  245,000.00 

$833,000.00    $833,000.00 

To  the  extent  that  the  above  figures  permit — 

1.  Prepare  Profit  and  Loss  Account  showing  results  of  the 

year's  operations ;  and 

2.  Show   how   you    would   incorporate  the   figures   in   the 

Surplus  section  of  the  Balance  Sheet,  or  in  a  separate 
stateiiient  of  the  Surplus  Account. 


PRACTICAL  PROBLEMS,  GRADED,    SERIES  B 


Code  :    Erosion 

You  are  called  in  to  make  an  audit  of  the  accounts  of  the 
"A.,"  "B."  &  **C."  Company.  Upon  taking  up  the  work  and 
ccounting  cash,  you  find  that  the  system  employed  maintains  a 
bank  account  in  the  ledger,  charging  it  for  all  deposits  and  credit- 
ing it  for  all  withdrawals,  but  that  it  is  not  the  practice  to  deposit 
the  entire  receipts  in  the  bank.  You  also  find  only  $176.15  of 
coin  on  hand  to  represent  the  balance  called  for  by  the  cash  book 
of  $573.15.  Upon  reporting  this  shortage  to  the  management, 
the  bookkeeper  is  suspended  and  you  are  instructed  to  immediately 
proceed  with  the  audit.  Upon  taking  oflf  the  balances  of  the 
ledger  accounts  you  obtain  the  following,  indicating  that  the 
ledger  is  out  of  balance: 


Cash  ^ ^ 

Bank  

iNotes  Receivable  

Accounts   Receivable 

Merchandise  Inven 

Merchandise    Purchases 

General  Expense 

Office  Expense  

Insurance  


573.15 

8,116.10 

375.00 

15,675.00 

37,500.00 

41,516.52 

3,526.00 

986.15 

708.52 


Notes  Payable  $  10,500.00 

Accounts  Payable  8,756.82 

Sales  63,815.27 

Capital  Stock  20,000.00 

Surplus  5,116.10 


$108,976.44 


$108,188.19 


During  your  audit  you  find :  That  there  are  errors  in  the 
credit  postings  to  the  sales  account,  which  result  in  understating 
the  balance  by  $788.25 ;  that  sales  sheets  aggregating  $1,365.00 
have  not  been  entered  and  upon  sending  invoices  for  these  un- 
entered sales  you  find  that  a  portion  of  them,  aggregating  $675.00, 
have  been  paid  by  the  debtors,  but  without  record  in  the  accounts. 
You  find  that  the  footing  of  the  credit  side  of  the  bank  account 
in  the  ledger  has  been  erroneously  increased  by  $1,000.00;  that 
the  posting  of  purchases  to  the  merchandise  purchase  account 
has  been  increased  in  two  instances,  one  by  $650.00  and  the  other 
by  $350.00;  that  the  footing  of  the  general  expense  column  in 
the  cash  book  is  erroneously  in  excess  to  the  extent  of  $182.00 ; 
that  one  of  the  postings  to  the  credit  of  accounts  receivable,  repre- 
senting the  collections  of  a  month,  has  been  erroneously  in- 
creased $350.00 ;  that  the  footing  of  the  credit  side  of  the  sales 
account  is  $350.00  too  little;  that  of  the  insurance  policies  indi- 
cated to  have  been  purchased,  two  have  been  canceled.  That 
the  returned  premiums  on  these  canceled  policies  which  have 
been  paid  amount  to  $86.15,  but  that  no  record  of  their  receipt 
appears  in  the  accounts. 

Make  the  necessary  entries  to  adjust  and  correct  all  of  the 
accounts,  producing  the  total  shortage.  The  bookkeeper  you  find 
is  covered  by  a  $2,000.00  surety  bond  with  the  National  Indemnity 
Company.  Exhibit  the  journal  entries  necessary  to  make  the 
adjustments  and  corrections  and  also  the  ledger  accounts  which 
are  aflfected. 

Is  any  other  work  then  necessary?  It  is  understood  that 
the  Accounts  Receivable  and  Accounts  Payable  are  controlling 
accounts  and  that  prior  to  the  correction  of  the  errors  the  indi- 
vidual ledgers  are  in  true  agreement  with  the  controlling  accounts. 


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Practical  Problems 

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Certified  Public  Accountant 


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Practical  Problems 

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Series  "C" 


BY 


Samuel  F.  Racine 

Certified  Public  Accountant 


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COPYRIGHT    1920 

BY 

SAMUEL  F.  RACINE 


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PUBLISHED    BY 

THE  WESTERN  INSTITUTE  OF  ACCOUNTANCY 

COMMERCE  AND  FINANCE 

LEARY  BLDG.  SEATTLE,  WASH. 


I 


Accounting  Students'  Series 

By  Samuel  F.  Racine,  C.  P.  A. 

Graded  Corporation  Problems,  1914  and  1918 ;  containing 
the  most  severe  C.  P.  A.  examination  problems  used  up  to  the 
year  of  publication,  1914;  since  revised  and  brought  down  to 
date,  1918. 

Guide  to  the  Study  of  Accounting,  191(),  containing  ana- 
lytical questions  similar  to  the  preceding  Guide  to  the  Study  of 
Accounting,  but  practically  a  new  book,  owing  to  the  advent  of 
new  books  of  recognized  authority. 

Guide  to  the  Study  of  Auditing,  1916.  The  publication  of 
a  new  Montgomery's  Auditing  required  that  the  original  Guide  to 
Auditing,  with  a  new  set  of  analytical  questions,  be  rewritten, 
hence  the  191()  book. 

Practical  Problems,  Series  "A,"  1916 ;  containing  the  great 
majority  of  the  C.  P.  A.  examination  questions  used  in  the  State 
of  Washington.    This  book  has  been  revised  three  times. 

Practical  Problems,  Series  ''B."  The  second  text  in  point 
of  severity  in  the  series  of  practical  problems. 

Accounting  Principles,  1917.  A  new  book  originally  writ- 
ten in  1913,  containing  much  subject  matter  not  found  in  other 
books  on  accounting.  Assuredly  it  contains  more  information 
than  any  other  single  book  on  the  subject. 

Syllabus  of  Bookkeeping,  1918.  As  with  all  of  Mr.  Racine's 
books,  originality  is  the  keynote  of  the  Syllabus  of  Bookkeeping. 
There  is  nothing  else  like  it  in  print.  It  is  hoped  that  it  will 
simplify  the  method  of  instruction  in  bookkeeping  to  an  extent 
not  considered  possible  by  other  instructors  of  the  present  day. 
It  is  designed  to  combine  the  advantages  of  lectures  with  the  other 
usual  methods  of  bookkeeping  instruction  and  is  proving  a  decided 
success  in  the  class  rooms  of  The  Western  Institute  of  Account- 
ancy, Commerce  and  Finance. 

Annuity  Studies,  1918 ;  a  set  of  rules  easy  to  understand, 
with  problems  on  annuities. 

Cost  Accounts  (In  preparation). 


v^ 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  C 


2. 


3. 


Code  :    Habit 

Based  on  the  following  brief  facts,  give  a  rough  outline  of 
the  character  of  accounting  organization  which  would  be  suitable 
to  reasonably  safeguard  a  company  engaged  in  the  manufacture  of 
foodstuffs  in  the  handling  of  the  funds,  assets,  etc.  Give  titles  and 
duties  of  the  most  important  members  of  the  accounting  organiza- 
tion (if  desired,  the  outline  of  the  organization  may  be  indicated  in 
the  form  of  a  chart.) 

1.  The  company  does  a  business  of  $50,000,000  per  year,  of 
which  70%  is  handled  through  branches  and  30% 
through  dealers. 

There  are  three  manufacturing  plants,  all  within  a  radius 
of  fifty  miles  from  the  head  office. 

There  are  seven  selling  branches  (not  separately  incor- 
porated)  located  at  some  of  the  principal  distributing 
centers  in  the  United  States,  each  of  which  has  its  own 
warehouse  for  carrying  stock  on  hand. 
The  company  maintains  a  proper  cost  system. 

All  invoices  for  outlay  on  manufacturing  (except  petty 
items)  and  for  salaries  and  other  important  expenses 
at  branches  are  paid  from  the  head  office. 

The  branches  keep  their  own  accounts  receivable  and 
make  collections  from  their  customers,  the  total  of  the 
collections  being  remitted  to  the  head  office  daily. 

All  the  dealers'  accounts  are  carried  on  the  head  office 
books. 

All  the  purchases  of  materials  are  made  through  a  central 
channel  at  the  head  office. 

The  manufacturing  plants  are  not  concerned  with  the 
selling  end  of  the  business  and  make  shipments  only 
on  instructions  of  the  head  office. 


4. 
5. 

e. 

•7. 
8. 
9. 

10. 


Each  plant  and  branch  keeps  a  petty  cash  fund  for  minor 
disbursements. 

Your  reply  should  include  a  list  of  the  records  which  should 
be  kept  at  the  head  office,  plants  and  branches,  respectively. 


i 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  C 


Code.    Habitable 

An  insurance  firm  acts  as  general  agent  for  two  insurance 
companies — Company  **A"  and  Company  ''B."  On  January  1, 
1907,  the  books  of  the  general  agent  disclose  the  following  finan- 
cial conditions : 

Assets  Liabilities 

Cash  $        2,340  Due  to  Company   "A" $        5,890 

Agents  Ledger,  Company  "A"        10,980  Due   to   Company   "B" 7,437 

Agents  Ledger,  Company  *'B"         15,360  ParLners  Accounts  lfi,35:] 

Furniture  and   fixtures 1,000  

$      29,680 

$      29,680  === 

By  treaty  agreement  between  companies  "A"  and  "B,"  this 
general  agent  has  to  reinsure  SO^J  of  all  '*A's"  risks  in  Company 
"B,"  and  30%  of  all  "B's"  risks  in  Company  "A-."  The  general 
agents  receive  from  each  company  a  commission  of  35%  on  the 
net  business  written  each  month.  The  general  agents  pay  20% 
commission  on  the  net  business  to  their  agents,  thus  making  net 
15%  for  themselves. 

The  agents  of  Company  "A"  report  to  the  general  agents, 
premiums  of  $12,000  during  January,  and  return  premiums  of 
$3,000. 

The  agents  of  Company  "B"  report  to  the  general  agents, 
premiums  of  $15,500  during:  January,  and  return  premiums  of 
$2,750. 

The  expenses  of  the  general  agents  during  January  amount 
to  $2,000,  and  the  partners'  withdrawals  amount  to  $1,000.  They 
receive  in  cash  from  agents  of  Company  "A"  the  sum  of  $11,- 
000,  and  from  agents  of  Company  *'B"  the  sum  of  $12,500.  They 
pay  to  their  companies  during  January  their  indebtedness  as  on 
the  first  of  the  month. 

Prepare  journal  and  cash  book  entries  recording  the  above 
transactions,  taking  into  consideration  reinsurance,  commissions, 
etc.,  and  prepare  a  statement  of  assets  and  liabilities  of  the  gen- 
eral agents  after  closing  the  balance  of  the  month's  profit  into  the 
partners'  accounts. 


i 


/ 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  C 

Code  :    Habitat 

On  February  20,  1903,  the  Board  of  Commissioners  for  a 
certain  county  met  for  the  purpose  of  preparing  the  annual  budget 
of  the  appropriation  bill  for  the  year  1903,  said  appropriation  to 
be  based  upon  the  estimated  receipts  for  the  year,  as  compiled  by 
the  comptroller.  Estimated  receipts  and  appropriations  are  as  fol- 
lows: 

ESTIMATED  RECEIPTS 

Cash  on  hand $  800,000.00 

Net  income  from  tax  levy 4,000,000.00 

Income  from  fee  offices 2,400,000.00 

Total  Estimated  Receipts  $7,200,000.00 

APPROPRIATIONS 

Principal  of  and  interest  on  bonds $   800,000.00 

Salaries   3,800,000.00 

Supplies  1,300,000.00 

Juror's  fees  400,000.00 

Election  purposes  300,000.00 

Old  liabilities  60,000.00 

Buildings  140,000.00 

Contingent 400,000.00 

Total  Appropriations $7,200,000.00 

Prepare  journal  entries  placing  appropriations  on  books.  The 
estimated  receipts  were  realized,  except  in  the  item  of  Fee  Offices, 
where  only  $2,350,000.00  was  earned.  The  entire  appropriation 
was  expended.  Prepare  journal  entries,  trial  balance,  and  balance 
sheet,  recording  the  results. 
Code  :    Hag 

**A*'  in  London  in  current  account  with  *'B"  of  New  York, 
engages  an  accountant  to  prepare  a  statement,  to  be  mailed  to 
**B,"  from  the  following  data: 

1914  Debits 

May  12  £  750 

May  30  1 17 

June  12  340 

July  1  150 

Total  debits  £  1,357 

1914  Credits 

June  10  „ £  500 

June  30  300 

Total  credits  £    800 

Balance   „ £    557 

Find  the  average  due  date  of  the  account  and  the  interest  at 
5%  to  July  1st,  365  days  to  the  year. 


i 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  C 


Code  :    Habitation 

1.  What  is  your  opinion  as  to  the  liability  of  the  person 
whose  name  is  signed  to  a  promissory  note: 

(a),  Where  he  signs  and  delivers  the  note,  without  con- 
sideration, to  the  party  who  tried  to  enforce  it? 

(b).  Where  his  signature  is  forged  by  the  party  who 
tries  to  enforce  it  ? 

(c),  Where  the  note  is  not  dated,  does  not  state  that 
it  is  given  for  value,  nor  specify  the  place  where  it  is  payable? 

(d)  Where  the  holder  of  the  note  has  unintentionally 
marked  it  canceled? 

2.  "A"  is  endorser  on  a  note,  and,  before  the  note  falls  due, 
is  adjudged  bankrupt.  Is  his  liability  as  an  endorser  a  provable 
debt  against  his  estate  ? 

3.  "A"  presents  his  check  to  the  Blank  National  Bank  and 
has  it  certified.    He  then  gives  it  to  ''B"  in  payment  of  a  debt. 
The  bank  fails  before  "B"  presents  it.    Can  "B"  hold  "A"  for  the 
amount  of  the  check? 

4.  What  rights  has  an  unpaid  seller  over  goods:     (a),  in 
transit;  (b),  after  delivery  to  the  purchaser? 

5.  (a)     What  is  the  general  rule  as  to  a  carrier's  liability 
for  goods  lost? 

(b)  Would  a  carrier  be  excused  for  non-delivery 
caused  by  seizure  of  goods  under  legal  process? 

(c)  Where  does  the  liability  of  a  carrier  begin,  and 
where  does  it  end  ? 

(d)  Has  a  carrier  any  lien  with  respect  to  goods  he 
transports?    If  so,  to  what  extent? 

6.  Define — 


( 


1/  Assignment ; 

2.  Annuity ; 

3.  Bailment; 

4.  Rill  of  Lading ; 

5.  Bona  Fide ; 

6.  Chattel ; 

7.  Escheat ; 

8.  Escrow ; 

9.  Fiduciary ; 
10.  Indemnity; 


11.  Intestate; 

12.  Jettison ; 

13.  Mandamus; 
14  Perjury; 

15.  Prima  Facie; 

16.  Quorum ; 

17.  Replevin ; 

18.  Tenure ; 

19.  Usury; 

20.  Waiver. 


7.     As  to  United  States  Laws : 

(a)  What  is  a  copyright  and  how  may  it  be  obtained? 

(b)  What  is  a  patent  and  how  may  it  be  obtained? 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  C 

Code  :    Habitual 

Wright,  Dunbar  &  Company,  of  New  York,  U.  S.  A.,  and 
Van  Allen  &  Company,  of  Amsterdam,  Holland,  bankers  and 
dealers  in  foreign  exchange,  enter  into  a  joint  venture  on  January 
2,  1914,  for  the  purpose  of  dealing  in  foreign  exchange. 

It  is  agreed  that  profits  or  losses  are  to  be  shared  equally,  that 
interest  on  the  account  current  is  to  be  figured  at  6%  per  annum, 
exact  number  of  days  per  month,  and  that  guilders  at  sight  are 
to  be  calculated  at  4014- 

The  blotter  of  the  New  York  bankers  records  the  following 
completed  transactions  for  the  joint  venture  of  the  first  month's 
operations : 


( 


January  10, 1914 
January  16, 1914 

January  16, 1914 

January  16, 1914 

January  27, 1914 

January  28, 1914 


Received  on  a/c  from  Borton  Bros.,  New  York,  and  sent 
to  Van  Allen  &  Company,  a/c  joint  venture,  £2000  on 
London,  due  February  10,  1914,  at  4.87  sight  and  4^%. 

Received  from  Van  Allen  &  Company  value  January  Z, 
1914,  their  draft  on  Wiener  Bros.,  due  February  25, 
1914,  kronen  48,000  on  Vienna  at  49^  guilders,  2 
months,  discount  4%. 

Cable  from  Van  Allen  &  Company  that  they  have  sold 
for  a/c  joint  venture,  value  this  day,  £2(X)0  on  Lon- 
don, due  February  10,  1914,  at  12  guilders,  2  months, 
discount  4%. 

Discounted  this  day  at  National  City  Bank,  New  York, 
for  a/c  joint  venture,  value  this  day,  £2000  on  Lon- 
48,000  on  Vienna,  due  February  25,  1914,  at  20%,  3 
months,  discount  4%. 

Received  from  Van  Allen  &  Company  value  January  13, 
1914,  their  draft  on  Charles  &  Company,  in  Berlin,  due 
February  13,  1914,  Rm.  30,000  at  59  guilders,  2  months, 
discount  5%. 

Sold  for  cash  a/c  joint  venture,  value  this  day,  Rm. 
30,000  on  Berlin,  due  February  13,  1914,  at  .95,  3 
months,  discount  5%. 


Prepare  as  at  January  31,  1914: 

a  A  statement  showing  separately  the  results  of  above  opera- 
tions as  conducted  in  New  York  and  Amsterdam,  re- 
spectively. 

b  The  ledger  accounts  of  the  joint  venture  and  of  Van  Allen 
&  Company  as  kept  by  the  New  York  firm  of  bankers. 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  C 


Code  :   Hack 

You  are  called  upon  to  audit  the  accounts  of  Roland  Stone 
&  Co.,  stock  brokers,  Chicago,  as  of  January  11,  1908. 

Statement  "A"  is  an  account  rendered  by  Henry  Hudson  & 
Co.,  the  New  York  correspondents  of  Roland  Stone  &  Co. 

Statement  "B"  is  an  account  current  made  up  from  Stone's 
books. 

Bring  down  the  long  and  short  currency  balances  on  state- 
ment *'A"  and  establish  the  net  balance;  also  show  balance  of 
stocks  open,  both  long  and  short. 

Bring  down  stock  balances  on  statement  "B,"  both  long  and 
short. 

Make  up  reconciliation  statement,  showing  currency  differ- 
ences between  **A"  and  "B"  statements. 

Statement  "A"  January  1  to  11,  1908 

ROLAND  STONE  &  CO.,  CHICAGO 
IN  ACCOUNT  WITH  HENRY  HUDSON  &  CO,  NEW  YORK 
Dr.  Bought 

1908 

Jan-    1  .  Balance— long  $  65,782.25 

— ^200  Atchison  Com. 
—100  Wabash  '""Z 

—  60  Reading 

—200  Steel  Com.  Z'Z 

?~!22«P?*-  47%  4,793.75 

3 — 100  Wabash  IQ  1 006  25 

.~^92  ^'■^o ''^  ^^^                                           22                          2!206.'25 
4-  10  B.  &  O.  Rec'd  

—  50  Anaconda  '  Rec'd 

6 — 200  Northwestern  137  27412 50 

o~  ?S  I:-  &  Nashville  90  i;801.'25 

8-  10  So.  Pacific  72%  725.63 

iA~  5S  i*^^!  P'-e^rred  87%  4,390.63 

10—  40  Steel  Preferred  88  '?  '>22  '^0 

11-100  Wabash  H  tj^fs 

cy  to  Mr.  Stone  200.00 

Express  on  bonds  to  Boston  i  50 

Balance  down — Short  [^ 

11  BALANCE— Long  __ 

Sold  Cr 

1908  ^*^- 

•^^"'    ^    inn  T,         .  ^        •  Balance— short  $  15.900.00 

—100  Pressed  Car  2,200 

—100  Northwestern  13,700 

2 — 100  Atchison  Com.  71%  7168  75 

— 100  Steel  Com.  26  *         2'w^  7«; 

3—100  U.  Pacific  125  12,49375 

4 — Check  on  Chemical  National  1500000 

-^2JJ  g^^^j.Com.  .  26%  2,625:00 

—  50  Readmg  Deliv'd 

6—100  Amal.  43  4  793  75 

7—150  Wabash  10  149062 

—  50  Wabash  Deliv'd 

8—100  L.  &  Nashville  91  "QcHiTi 

10-100  Steel  Preferred  90  8,'99375 

11 — Dividend  So.  Pacific  '  is^O 

Balance  down — Long  ' 

$106,901.62 
11  BALANCE— Short 

(Continued  on  next  page.) 


i 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  C 


Code:    Hack — (Continued) 

Statement  "B"  January  1  to  11,  1908 
HENRY  HUDSON  &  CO.,  NEW  YORK 
IN  ACCOUNT  WITH  ROLAND  STONE  &  CO.,  CHICAGO 
Dr-                                                    Bought 
1908 

Jan.    1 — 

—100  Press'd  Car  I..."  ."."Z 
— 100  Northwestern 

1—100  Atchison  Com.  71%                        7,168.75 

2—100  Union  Pacific  125                         12,493.75 

—Draft  Chemical  National  15,000.00 

3 —  50  Reading  Rec'd 

—100  Amal.  48 1^                        4,843  75 

6—150  Wabash  10                           li49o!63 

7—  50  Wabash  Rec'd 

—100  Steel  ^om.  26                           2^59375 

—100  Steel  Com.  26%                        2,668.75 

8—100  Northwestern  137                         13,693.75 

9 — 100  Union  Pacific  125                         12  493  75 

10—100  L.  &  Nashville  91                           9093 75 

11—100  Steel  Pref'd  90                          8,'993.'75 

— 200  Mo.  Pacific  45                           4i493.75 

Balance  down  11  873.49 


1908 

Jan.     1 —                  Balance- 

Sold 

-Short 
Long 

it 

per  &  Co. 

65.782.25 
15.900.00 

$106,901.62 
Cr. 

49.882.25 

—200  Steel  Com. 

47% 

10 

22 

Deliv'd 

Deliv'd 

137 

90 

72% 

46 

— ^200  Atchison  Com. 

—100  Wabash 
—  60  Reading 

— 

3—100  Amal 
4—100  Wabash 
—100  Press'd  Car 
10  B.  &  0. 
6 —  50  Anaconda 

4,793.75 
1,006.25 
2.206.25 

— ^200  Northwestern 

7—  20  L.  &  Nashville 

8—  10  So.  Pacific 

10 — Dividend  Am.  Biscui 
11 — cy  from  Jones,  Hoo] 
—400  Mo.  Pacific 

27,412.50 

1,800.00 

725.62 

150.00 

500.00 

18,425.00 

$106,901.62 

i 


Jan.  11— 


BALANCE 


$  11,873.49 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  C 


Code  :    Hackle 

At  the  close  of  the  first  year,  after  engaging  in  business,  the 
ledger  balances  of  an  Illinois  fire  insurance  company  may  be  as- 
sumed to  be  correctly  stated  as  follows : 

Losses  adjusted  and  paid $  16,785.90    $ 

Losses  adjusted,  not  paid 5,210.85 

Premiums  in  hands  of  Agents 7,892.54 

^apital  '      '          200,000.00 

^"'■P'HS    100,000.00 

Premiums  97,500.00 

Interest   g  942  59 

Commissions   26,847.25 

J^^?  1,510.83 

Salaries 7,428.10 

Vjeneral  Expenses  16  582  72 

Investments  and  Loans  ZZZZ'Z.  290,150.69 

(Jrhce  Furniture  2  49510 

Stationery  and  Supplies   (Inventory) 1,828  90 

Accounts  Receivable  16825  95 

Accounts  Payable.. :::::z;;::;::    '  ■      3,180.75 

Reserve  for  losses  adjusted  5  21085 

Organization  expense  182203  ' 

^ash  ZZZIZ    \9A5324 

$414,834.10    $414,834.10 

The  policy  register  shows  : 

Policies  Premiums 

T7     •  •       -1                                                                       Issued  Received 

Expiring  in  1  year $1,300,000.00  $  15,00000 

Expiring  in  2  years 1.075,000.00  18,50000 

Expiring  in  3  years 1.450,000.00  34,50000 

Expiring  in  5  years 1.250,000.00  29,500!00 

$5,075,000.00  $  97,500.00 
The  Illinois  statute  reads : 
^^  "In  estimating  profits,  there  shall  be  reserved  therefrom  a  sum 
equal  to  the  whole  amount  of  unea  ned  premiums  on  unexpired  risks 
and  policies.  *  *  *  *  *  *  The  company  may  declare  dividends, 
not  exceedmg  10  per  cent  of  its  capital  stock,  in  any  one  year  that 
shall  have  accumulated  and  be  in  possession  of  a  fund,  in  addition  t6 
the  amount  of  its  capital  stock  and  of  such  dividends  and  all  actual 
outstanding  liabilities,  equal  to  one-half  of  the  amount  of  all  ore- 
miums  on  risks  not  terminated  at  the  time  of  making  such  dividends 
A  year  is  defined  to  mean  a  calendar  year."    ******** 

Determine  the  reserve  required  and  state  what  sum,  if  any, 
is  available  for  dividends  without  impairing  the  surplus  shown 
in  the  ledger  balances.  Changes  in  relation  to  policies  cancelled 
or  settled  from  under  claims  for  losses  may  be  ignored. 


i 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  C 


Code  :    Hackney 

From  the  following  trial  balance  of  the  "P.  Q."  Company  at 
December  31,  1914,  and  other  data,  prepare  a  Balance  Sheet  and 
Profit  and  Loss  Account.  Give  details  showing  the  method  of 
arriving  at  any  adjustments  you  make. 

Accounts  receivable  $250,000.00       $ 

Accounts  payable  273,000.00 

Accrued  taxes  2,000.00 

Advertising 12,500.00 

g"»Jding 100,000.00 

Bad  debts  written  off 4,000.00 

Capital  stock '                   300,000.00 

Cash  on  hand  and  in  bank '...  1100000 

gividends   50,000.00 

Discount  on  sales 15,000.00 

Discount  on  purchases '                     1000000 

Direct  labor  ""Z".  250,000.00 

Depreciation  of  building 2,000.00 

II              ]|    machinery    8,000.00 

factory  fixtures,  tools  and  equip- 
ment    3  000.00 

Depreciation  of  office  furniture  and  fixtures ."..  500.00 

Factory  fixtures,  tools  and  equipment 20,000.00 

General  office  expenses 500000 

Indirect  labor ZZZZZZ^.  95!000"00 

insurance  on  factory  and  contents 2  00000 

Inventory  at  January  1,  1914 — 

Raw  material  7000000 

Work  in  process  and  finished  stock 130000 00 

Supplies 10',000.00 

Investment    in    capital   stock   of   Wilson    Selling 

T       C^'— subscribed  for  at  par— (l-6th  interest)....  10,00000 

|-?^--r-" "--v-v ■ : 50.000.00 

Light,  heat  and  janitor  service 1000000 

Machinery   "  IQO.'OOO^OO 

Urtice  furniture  and  fixtures 5  000  00 

Office  salaries  "Z       12;000:00 

Officers    salaries  20.000.00 

P^^t'"  60,000.00 

Purchases  345,000.00 

Kepairs  to  building 2.090  00 

Repairs  to  machinery 8  000  00 

Salesmen's  salaries  Z'Z'Z  22!o00.00 

expenses  19,000  00 

Salaries  of  foremen  and  superintendents 12,000.00 

Sales — less  return  sales  and  allowances '  945  00000 

taxes  ...      3,000.00 

Unexpired  msurance  100000 

$1.717,000.00     $1.717.000.00 

The  Wilson  Selling  Co.  was  organized  to  handle  the  selling 
of  part  of  the  product  of  this  company  and  of  several  others  and 
it  is  now  disposing  of  about  one-fifth  of  the  product  of  this  com- 
pany to  advantage.  Although  the  stock  is  now  selling  at  70% 
of  its  par  value,  there  is  no  immediate  likelihood  of  the  company 
being  disorganized  and  it  is  thought  that  it  may  subsequently 
prove  more  profitable. 

For  the  purposes  of  this  problem,  it  may  be  assumed  that  the 
inventory  at  January  1,  1914,  was  correctly  valued. 

(Continued  on  next  page.) 


} 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  C 

Code:    Hackney — (Continued) 

The  inventories  at  December  31,  1914,  may  be  summarized 
as  follows : 

Raw  material — wood  (market  value  $28,000.00) — 

cost  $30,000.00 

Raw  material — metal  (market  value  $48,000.00) — 

cost  45,000.00       $  75,000.00 

Work  in  process  and  finished  product — an  analysis 
of  the  inventory  prices  shows  that  it  consists 
of: 

Material  $60,000.00 

Direct  labor  40,000.00 

Overhead  (125%  of  direct  labor) 50,000.00         150,000.00 

Supplies— at  cost  15,000.00 

Total  inventory /         $240,000.00 


0 


4 

t 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  C 


Code  :    Hackneyed 


I 


1.  What  is  the  general  nature  of  a  partnership? 

2.  What  are  the  liabilities  of  partners  : 

(a)  To  the  public; 

(b)  To  each  other? 

3.  What  is: 

(a)  A  general  partnership ; 

(b)  A  special  or  limited  partnership' 

4.  As  to  kinds  of  partners,  what  are: 

(a)  Ostensible  partners ; 

(b)  Secret  partners  ; 

(c)  Dormant  or  silent  partners; 

(d)  Nominal  partners? 

5.  How  may  a  partnership  be  dissolved  ? 

6.  What  is  an  agent's  liability: 

(a)  To  his  principal ; 

(b)  To  a  third  party? 

7.  How  is  agency  revoked? 

8.  An  agent  without  express  or  implied  authority  sold  the 
principal's  goods  with  warranty.    The  principal  with  full 

•  knowledge  of  the  facts  received  the  sale  price.  Can  he 
set  up  the  agent's  lack  of  authority  to  give  the  warranty 
as  a  defense,  if  sued  for  a  breach  of  the  warranty? 

9.  As  to  kinds  of  agency,  what  are : 

(a)  Special  agency; 

(b)  General  agency ; 
m     (c)  Limited  agency; 

(d)  Unlimited  agency; 

(e)  Factor; 

(f)  Broker? 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  C 


Code  :    Haddock 

The  Detroit  United  Railway  Company  with  an  authorized 
Capital  Stock  of  $1,000,000  consisting  of  5,000  shares  each  of 
Preferred  and  Common  Stock  at  the  par  value  of  $100,  had  on 
January  1st,  1912,  assets  and  liabilities  as  follows : 


Assets 

txeal   Estate  and    Building $  200,000 

Power  Plant  and  Machinery....  250,000 

Aerial  Construction  200,000 

Surface  Construction  200,000 

Underground  Construction 150,000 

Rolling   Stock  300,000 

Accounts   Receivable  10,000 

Cash    5,000 


Liabilities 

Preferred  Stock  $  450,000 

Common  Stock  400,000 

First    Mortgage   Bond,   5% 350,000 

Accounts  Payable  5,000 

Surplus  110,000 


$1,315,000 


$1,315,000 


The  Pontiac  Electric  Company,  with  an  authorized  Capital 
Stock  of  $500,000,  had  on  the  same  day,  assets  and  liabilities  as 
follows : 


Real  Estate  $  300,000 

Power  Plant  and  Machinery....  150,000 

Aerial  Construction  125,000 

Underground   Construction   ....  100,000 

Sundry    Assets   16,000 

Profit  and   Loss  10,000 


Liabilities 

Capital  Stock  $  600,000 

Mortgage,  6%  100,000 

Accounts  Payable  100,000 


$    700,000 


$    700,000 


The  Detroit  United  Railway  Company  purchased  securities 
of  the  Pontiac  Electric  Company  in  quantities  and  at  prices  as 
follows : 

$400,000  of  the  Capital  Stock  at  $125,  payable  in  cash. 

$50,000  of  the  Capital  Stock  at  $130,  payable  with  $30,000  of 
the  preferred  stock  of  the  Detroit  United  Railway  Company  at 
$150  and  cash  to  balance. 

$100,000  of  the  bonds  at  $115,  payable  in  the  unissued  com- 
mon stock  of  the  Detroit  United  Railway  Company,  at  $93  and 
cash  to  balance. 

$10,000  of  the  cash  payable  for  the  stock  purchased  to  be 
passed  to  credit  of  Profit  and  Loss  account  of  the  Pontiac  Elec- 
tric Company  by  the  vendors  to  cancel  the  charge  of  like  amount 
to  said  account. 

To  divide  funds  to  meet  the  above  obligations  and  also  to  re- 
tire its  5%  Mortgage  Bonds  at  $105,  the  Detroit  United  Rail- 
way Company  issued  $1,000,000  of  4%  Bonds  and  sold  the  entire 
amount  for  cash  at  95%. 

Assuming  that  the  dividend  of  the  Pontiac  Electric  Company 
declared  during  the  year  1912  amounted  to  $25,000,  and  the 
profit  of  the  Detroit  United  Railway  Company  from  operating 
exclusive  of  interest  on  its  bonded  debt  amounted  to  $100,000 
to  wlrat  extent  has  the  profit  and  loss  of  the  Detroit  United  Rail- 
way Company  been  affected,  during  the  year,  by  reason  of  its 
acquisition  of  the  securities  of  the  Pontiac  Electric  Company  and 
of  the  redemption  of  its  own  5%  Bonds.  Show  also  the  condi- 
tion of  accounts  of  the  Detroit  United  Railway  Company  at  the 
end  of  the  year. 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  C 


Code  :    Hades 

A  French  merchant  having  a  debt  of  £10,000  to  liquidate  in 
London  in  45  days,  desires  to  know  where  it  would  be  the  most 
advantageous  for  him  to  purchase  English  money,  in  Paris, 
Amsterdam  or  Berlin. 

The  market  quotations  in  the  respective  places  on  a  certain 
given  date  reveal  the  following: 

Paris 
Frs. 
London  paper  at  sight  25.275   less  6% 

Amsterdam  paper  at  3  mo.    205         and  4% 
Berlin  paper  at  3  mo.  121  ^        "     4% 

Amsterdam 
Guilders  Disc,  in  London 

12.075  at  2  months  6% 

Berlin 
Reichsmarks  Disc,  in  London 

20.25  at  3  months  6% 

Prepare  the  required  statement,  ignoring  all  banking  charges 
and  selling  commissions. 


ft 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  C 


Code  :   Haft 

A   public  library   presents  the   following  trial  balance   of  its 
ledger : 

Allen  fund  for  purchase  of  historic  literature $ $      92,000 

Smith  fund  for  purchase  of  Civil  War  literature 18,000 

Receipts  from  lost  books 100 

Membership  annual  fees 14,500 

Income  from  Allen  fund „ 3,680 

Income  from  Smith  fund  540 

Salaries  and  sundry  expenses    8,640 

Rent  6,400 

Purchase  of  historic  literature 3,400 

Purchase  of  Civil  War  literature 4S0 

Cash  in  bank  4,930 

Securities  Allen  fund   « 90,000 

Securities  Smith  fund     , 15,000 

$  128,820      $  128,820 


4 


Prepare  a  report  showing  the  financial  status  of  the  library. 


(I 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  C 

Code  :    Hag 

"A"  in  London  in  current  account  with  "B"  of  New  York, 
engages  an  accountant  to  prepare  a  statement,  to  be  mailed  to 
"B,"  from  the  following  data : 

1914  Debits 

May  12  £  750 

May  30  1 17 

June  12  340 

July  1  _ 150 

Total  debits „ £  1,357 

1914  Credits 

June  10 £  500 

June  30  300 

Total  credits  £    800 

Balance  £    557 

Find  the  average  due  date  of  the  account  and  the  interest  at 
5%  to  July  1st,  305  days  to  the  year. 


\ 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  C 


'I 


Code  :    Haggard 

Union  County  undertakes  two  public  improvements,  viz.,  a  road 
estimated  to  cost  $50,000,  and  a  sewer  estimated  to  cost  $40,000. 

The  work  is  to  be  paid  for  out  of  proceeds  of  county  bonds 
falling  due  at  various  dates  and  redeemable  from  assessments 
levied  against  property  presumably  benefited,  to  the  amount  of 
the  actual  cost  of  the  work  and  incidental  charges  when  these 
are  determined. 

Bonds  to  the  above  amounts  are  sold  realizing  a  premium  of 
1%  which  is  added  to  the  funds.  The  cost  of  the  two  undertak- 
ings when  completed  is  $50,000  and  $40,500  respectively,  for 
which  assessments  are  levied. 

Assessments  are  collected  as  follows :  For  roads  $30,200,  with 
interest  of  $1,310;  for  sewers,  $29,400,  with  interest  of  $1,250. 
The  interest  in  each  case  goes  to  the  funds. 

Road  bonds  par  value  $20,000  and  sewer  bonds  par  value 
$15,000  mature  and  are  redeemed. 

Prepare  a  trial  balance  of  the  transactions  from  which  the 
status  of  the  county  debt  and  of  the  funds  and  assessments  at  the 
conclusion  of  the  above  transaction  could  be  ascertained. 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  C 


Code  :    Haggle 

The  following  is  a  trial  balance  of  a  firm  of  stockbrokers,  doing 
business  under  the  name  of  Adams  &  Jones : 

Customers   $10,500,000.00     $ 

Customers   250,000.00 

Cash  150,000.00 

Loans  9,500,000.00 

Borrowed  on  loan  account 110,000.00 

Investments  580,000.00     ' 

Furniture  and  fixtures 3,600.00 

Interest  33,400.00 

Commission  account  190,600.00 

Expenses   34,400.00 

Adams  650,000.00 

Jones  534,000.00 

$1 1,268,000.00     $1 1,268,000.00 

Stocks  borrowed  $  370,000.00 

Stocks  loaned  480,000.00 

Commissions  due  other  brokers 1.500.00 

Interest  accrued  on  loans 3,040.00 

Stocks  pledged  to  secure  loans 11,400,000.00 

Stocks  in  transfer 130,000.00 

Stocks  loaned  to  other  brokers 486,000.00 

Stocks  on  hand 384,000.00 

Prepare,  in  technical  accounting  form,  a  financial  statement  of 
the  firm. 


i 


'♦ 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  C 

Code  :    Hail 

A  Municipal  Comptroller  had  upon  his  books  at  the  beginning 
of  his  fiscal  year  the  following  bonds  outstanding  totaling 
$500,000.00  as  follows : 

Improvement  Bonds $100,000.00 

Building  Bonds  300,000.00 

Refunding  Bonds  100,000.00 

Cash  in  the  hands  of  the  Treasurer,  $100,000.00. 
Credit  Balances  to  the  following  funds: 

a $  25,000.00 

b 10,000.00 

c 15,000.00 

d 30,000.00 

e 20,000.00 

The  earnings  of  the  municipality  for  the  ensuing  year  and  the 
amounts  necessary  to  be  raised  by  taxation  were  estimated  as 
follows : 

Earnings  from  various  departments $200,000.00 

Liquor  Licenses  500,000.00 

Taxes  300,000.00 

The  earnings  from  various  departments  and  liquor  licenses 
are  placed  in  Fund  a.  Taxes  are  divided  among  the  funds  as  fol- 
lows:  b,  30%  ;  c,  20% ;  d,  15%  ;  e,  35%. 

At  the  close  of  the  fiscal  year  the  following  collections  had 
been  received: 

Earnings  from  various  departments $175,000.00 

Liquor  Licenses  490,000.00 

Taxes  250,000.00 

Make  the  necessary  entries  in  full  and  present  a  balance 
sheet  at  the  beginning  and  close  of  the  fiscal  year. 


I 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  C 


Code  :    Hair 

A  New  York  corporation  builds  a  plant  and  establishes  a  branch 
in  Liverpool,  England.  At  the  expiration  of  its  fiscal  period,  a 
trial  balance  is  forwarded  to  the  New  York  office,  as  follows: 

Plant    £  250,000 

Accounts  receivable  187,500 

Expenses    25,000 

Inventory  (end  of  fiscal  period) 50,000 

Remittance  account  150,000 

Cash  12,500 

Accounts  payable  £  87,500 

Income  from  sales  250,000 

New  York  office 337,500 

£675,000       £675,000 


A  trial  balance  of  the  New  York  books  at  the  same  date  was 
as  follows  : 

Capital  stock  $  2,500,000.00 

Patents  $  1,500,000.00 

London  account  1,640,250.00 

Remittance  account  729,281.25 

Expenses  at  New  York 25,000.00 

Cash  64,031.25 

$  3,229,281.25     $  3,229,281.25 


I 


The  Remittance  Account  is  composed  of  four  sixty  (60)  day 
drafts  on  Liverpool  for  £37,500  each,  which  were  sold  in  New 
York  at  $4.85i/2,  $4.86,  $4,861/2  and  $4,863/4,  respectively. 

Prepare  a  balance  sheet  of  the  New  York  books  after  closing 
and  a  statement  of  assets  and  liabilities  of  the  Liverpool  branch 
reconciled  with  the  New  York  books.  Close  the  books  at  rate 
of  exchange  on  last  day  of  fiscal  period  $4.8714  (conversion  of 
remittance  to  be  made  at  the  average  rate  of  the  four  bills). 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  C 


Code  :    Haitain 

On  January  1,  1906,  the  Never  Slip  Razor  Company  was  in- 
corporated with  a  capital  stock  of  $50,000.00,  subscribed  as 
follows:  J.  Colgate,  $10,000.00;  T.  Williams,  $20,000.00;  R. 
Armour,  $20,000.00. 

Colgate's  subscription  was  settled  by  the  transfer  of  patent 
rights  to  the  company.    Williams  and  Armour  paid  cash. 

W.  Morgan  was  appointed  manager,  at  a  salary  of  $5,000.00, 
and  10%  commission  on  the  profits  prior  to  charging  his  com- 
mission. 

As  at  December  31,  1915,  the  financial  position  of  the  com- 
pany was  as  follows: 

Assets : 

Current  and  Working $  75,000.00 

Patents,  etc 65,000.00 

Total  $140,000.00 

Liabilities : 

Current  and  Accrued  $  10,000.00 

Capital  Stock  50^000.00 

Surplus  80,000.00 

Total  .$140,000.00 

The  current  and  accrued  liabilities  of  $10,000.00  include 
$4,000.00  due  to  W.  Morgan  for  excess  of  salary  and  commission 
to  date  over  drawings. 

The  profit  and  loss  account  for  the  ten  years  showed  net 
profits  available  for  dividends  as  follows:  190(5,  $4,500.00;  1907, 
$13,500.00;  1908,  $27,000.00;  1909,  $18,000.00;  1910,  $27,- 
000.00;  1911,  36,000.00;  1912,  $45,000.00;  1913,  $03,000.00;  1914, 
$81,000.00  ;  1915,  $126,000.00  ;  total,  $441,000.00. 

It  was  decided  to  form  a  new  company,  The  Never  Slip 
Corporation,  with  a  capital  stock  of  $500,000.00,  to  take  over 
the  business  as  at  January  1,  1916. 

Stock  was  to  be  allotted  and  distributed  to  the  original  stock- 
holders of  the  old  company  in  the  ratio  of  eight  fully  paid  new 
shares  for  one  old  share.  The  balance  was  to  be  issued  to  W. 
Morgan  to  secure  his  services  as  manager,  with  an  annual  salary 
of  $5,000.00  and  no  commission. 

The  Patents  Account  in  the  books  of  the  old  company  was 
as  follows :  • 

Jan.     1,  1906  Patent  Rights  acquired  from  J.  Colgate $10,000.00 

Dec.  31,  1906  Application  Fees,  Attorney  Fees,  etc 1,000.00 

Dec.  31,  1907  Application  Fees,  Attorney  Fees,  etc 500.00 

Dec.  31,  1908  Application  Fees,  Attorney  Fees,  etc 500.00 

Dec.  31,  1909  Application  Fees,  Attorney  Fees,  etc 2,000.00 

Dec.  31,  1910  Application  Fees,  Attorney  Fees,  etc 12,000.00 

Dec.  31,  1911  Application  Fees,  Attorney  Fees,  etc 8^000.00 

Dec.  31,  1912  Application  Fees,  Attorney  Fees,  etc 7,000.00 

Dec.  31,  1913  Application  Fees,  Attorney  Fees,  etc 7,000.00 

Dec.  31,  1914  Application  Fees,  Attorney  Fees,  etc 7^000.00 

Dec.  31,  1915  Application  Fees,  Attorney  Fees,  etc lO^OOO^OO 

Total $65,000.00 

(Continued  on  next  page.) 


4 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  C 


Code:    Haitain — (Continued) 

The  date  of  the  principal  patent  was  January  1,  1909.  It  was 
decided  that  all  expenditure  on  patents  until  that  date  should  be 
capitalized.  But,  after  that  date,  the  account  was  to  be  adjusted 
by  provided  for  writing  off  the  principal  patent  by  January  1, 
1926 ;  all  expenditure — before  and  after  January  1,  1909 — being 
considered  as  connected  with  the  principal  patent.  Depreciation 
to  be  computed  on  final  balances  each  year. 

Show  how  you  would  adjust  the  Patents  Account.  Also  ad- 
just the  accounts  so  that  W.  Morgan  is  credited  with  20%  com- 
mission in  lieu  of  the  salary  and  the  10%  commission  during  the 
5  years  ended  December  31,  1915,  no  adjustment  being  required 
for  previous  period.  Give  (1)  W.  Morgan's  account,  (2)  a  sum- 
mary of  net  profits  for  the  10  years,  (3)  balance  sheet  of  the  old 
company,  (4)  balance  sheet  of  the  new  company,  (5)  and  a  recom- 
mendation as  to  depreciation  to  be  written  off  the  intangible  assets 
of  the  new  company. 


4 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  C 


Code  :    Ha  n  dsom  e 

As  to  the  Administration  of  Estates : 

1.  What  is  the  difference  between  an  administrator  and  an 
executor  ? 

2.  What  is  the  meaning  of: 

(a)  Letters  Testamentary; 

(b)  Letters  of  Administration ? 

3.  Under  what  conditions  is  a  surviving  partner  entitled  to 
administer  upon  the  partnership  estate? 

4.  What  are  the  responsibihtiej  of  an  executor  or  adminis- 
trator for  funds  of  the  estate  deposited  by  him  at  a  bank  ? 

As  to  banks  and  trust  companies : 

1.  What  process  is  followed  by  the  county  assessor  in  levy- 
ing a  tax  against  bank  stock  ?  How  are  such  taxes  paid, 
and  how  and  by  whom  are  the  taxes  paid  deductible  in 
income  tax  returns? 

2.  What  is  the  limit  of  the  liability  of  a  stockholder  in  a 
bank? 

3.  What  is  a  trust  company  ? 

4.  What  is  a  building  and  loan  association? 
As  to  corporations: 

1.  What  is  a  corporation? 

2.  How  is  a  corporation  organized  under  the  laws  of  the 
State  of  Washington  ? 

3.  Can  a  corporation  perform  corporate  acts,  such  as  the 
mortgaging  of  its  real  property,  while  there  is  a  vacancy 
in  its  board  of  trustees? 

4.  Are  the  stock  certificates  of  a  corporation  negotiable  ? 

5.  How  may  a  corporation  be  dissolved  under  the  laws  of 
the  State  of  Washington  ? 

6.  Do  minority  stockholders,  who  may  not  have  assented  tc 
the  dissolution  of  a  going  corporation,  not  insolvent,  have 
anv  remedy  at  law? 

7.  What  are  the  different  kinds  of  corporations  ? 
As  to  the  United  States  Bankruptcy  Laws: 

1.  What  are  acts  of  bankruptcy  ? 

2.  Who  may  become  bankrupts? 

3.  What  are  the  duties  of  bankrupts  ? 

4.  What  are  the  compositions  with  creditors  ? 

5.  What  are  the  duties  of  a  trustee  in  bankruptcy? 

6.  What  are  preferred  creditors?    Give  illustrations. 


» 

4 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  C 

Code  :    Halbkrd 

Adams  of  New  York  and  Lotimer  of  St.  Paul  each  maintain 
an  account  current  with  the  ether.  Settlements  to  be  made  semi- 
annually, by  30  day  notes,  including  interest  on  the  account  at  G%. 
Their  transactions  for  the  six  months  ending  June  30,  1915,  were 
as  follows : 

Adams  charges  Lotimer : 

1915 

January    15,  Acceptance  drawn  by  Lotimer.  due  January     31,  $  21,000 

February  10,   Draft  in  favor  of  Hardens  bank  due  February  28,  1,200 

March      31,  Cash  due  March       31,  1,500 

April        12,  Draft  in  favor  of  Lotimer due  March       31,  1,800 

May         14,  Net  proceeds,  Account  Sales....  due  August      31,  6,000 

June         28,  Note— Smith  and  Company due  October     31,  4,500 

— — I—  ■  $    36,000 

Lotimer  charges  /\.dams : 

1915 

January    15,    Net  proceeds.  Account  Sales due  March  31,  $      6,000 

February  28,    Cash,  note  of  Reynolds due  February  28,  1,800 

March      31,    Cash,  repayment  due  April  15,  1,500 

April        12,    Joint  Account,  one  half  interest 

on  loss  due  March  31,  1,200 

May  14,    Acceptance    favor    Johnson    & 

Company  due  August  31,  4,500 

June         28,    Account  Sales,  Wood  due  July  31,  21,000 

$    36,000 

Prepare  an  account  current,  with  interest,  as  rendered  by  either 
party  to  the  other,  supplying  the  credit  side  of  the  account  and 
showing  the  net  balance  of  account  at  October  31,  for  which  a 
note  should  be  given. 


4 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  C 


£4000=    $19,480 
£  100=  487 

£  900=        4,383 


Code  :    Hale 

William  Pitt  and  John  Fox,  merchants  with  offices  in  Manches- 
ter and  New  York,  equally  interested  in  a  business  venture,  decide 
to  dissolve  the  partnership  as  at  Dec.  31,  1911,  at  which  time  their 
financial  position  is  as  follows: 

Accounts  receivable  uncollected 
Office  furniture  on  hand 
Accounts  payable  unliquidated 

The  accounts  had  been  kept  in  dual  currency. 

Pitt  acts  as  liquidator  and  takes  over  the  business,  agreeing  to 
purchase  the  furniture  at  a  10%  reduction  as  at  January  1,  1912 
and  to  allow  on  the  same  date  to  Fox  £600  =  $2922  for  his  share 
of  the  goodwill. 

The  accounts  receivable  are  collected  on  the  following  dates: 

April     15/12  £1000=  $4,870      April       23/12  £  100=  $   487 
June      10/12  £1600=    7,792      October    8/12  £1200=     6,844 

The  balance  is  uncollectible  and  considered  lost. 

The  accounts  payable  are  liquidated  in  full  as  follows: 

March  11/12  £100=    $   487      April       20/12  £200=    $    974 
May      30/12  £300=      1,461      October  26/12  £300=      1,461 

After  deduction  of  the  payments  made,  the  net  receipts  are 
realized  on  a  certain  average  date  (to  be  determined)  from  the 
date  of  dissolution. 

Pitt  advances  to  Fox  £1000  =  $4870  on  March  31,  1912,  and 
pays  him  the  balance  on  January  1,  1913,  with  interest  at  6% 
per  annum. 

Prepare  an  Account  Current  in  English  currency  only  (calcu- 
lating interest  at  above  stated  rate)  as  Pitt  shall  render  to  Fox, 
disclosing  the  amount  due  the  latter  as  at  January  1,  1913. 


» 

4 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  C 


Code  :    Halftone 

In  auditing  the  accounts  of  a  wtiolesaie  company  what 
consideration,  if  any,  would  you  give  to  the  verification  of 
purchased  goods  in  transit  at  the  date  of  the  Balance  Sheet 
you    are    asked    to    prepare*' 

«  4c  «  3|e  # 

For  what  purposes  are  the  following  accounts  created, 
and,  in  what  manner  would  you  undertake  to  satisfy  your- 
self as  to  the  necessity  for  their  creation  and  as  to  the 
amounts  which  should  be  provided; 

1.  Reserve  for  Bad  and  Doubtful  Accounts; 

2.  Reserve  for  Allowances; 

3.  Reserve  for  Discounts? 

♦  4^         ♦         *         « 

In  auditing  the  accounts  of  a  mi  nufacturing  business  you 
are  asked  particularly  to  ascertain  that  all  outstanding  ac- 
counts have  been  brought  in. 

How  would  you  satisfy  yourself  on  this  point  as  regards: 
Wages ; 
Taxes; 
Trade  Creditors'  Accounts? 

*  *        *        *        ^ 

State  two  other  classes  of  accounts  which  you  would 
probably  investigate. 

*  if  *  iti  * 

You  are  instructed  to  make  an  auuii  of  a  Lighting  ana 

Water  Company  in  connection  with  a  proposed  issue  of  bonds. 

State  the  points  to  which  you  would  consider  it  necessary  to 

give  particular  attention.    Also  state  what  financial  statements 

you  would  give  to  your  clients. 

«        *        «        «        1^ 

How  may  the  amount  of  Stock  on  Hand  of  a  merchant  be 

estimated  from  time  to  time  when  it  is  not  practicable  to  t?.kf 

a  physical  inventory  more  than  once  a  yerr? 

*  4(  4e  ♦  « 

State  the  object  of  keeping  stores  accounts,  and  explaiL 

how  they  are  used  in  a  system  of  cost  accounts. 

*  >o        ♦        ♦        * 

In  reporting  upon  an  audit  you  include  as  an  asset  "Ad- 
vances to  Officers,"  $10,000.00.  The  advances  have  been 
authorized  and  there  is  every  probability  th£t  they  will  be 
repaid.  The  President  of  the  company  asks  you  to  make  up 
a  UfcW  Balance  Sheet  and  include  this  item  among  Accounts 

Receivable.    How  would  you  answer  him? 

*  *       *        *        * 

In  auditing  the  books  of  a  Steamship  Company  you  find 

the  following  journal  entry: 

Bond  Sinking  Fund  Account  Dr.  $25,000.00 

Bond  Sinking  Fund  Reserve  Cr.     25,000.00 

The  Bond  Sinking  Fund  Account  was  at  the  close  of  the 

year  transferred  to  Surplus  Account.    State  what  action  you 

would  take  in  this  connection. 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  C 


Code:    Highland 

1.  (a)  What  are  the  general  requisite  of  a  negotiable  in- 

strument ? 

(b)  What  is  consideration  ? 

(c)  What  is  a  holder  for  value? 

2.  As  to  promissory  notes: 

(a)  What  is  an  individual  promissory  note? 

(b)  What  is  a  joint  promissory  note? 

(c)  What  is  a  joint  and  several  promissory  note? 

3.  Define : 

(a)  Presentment. 

(b)  Protest,  and  its  object. 

4.  As  to  endorsements,  what  are: 

(a)  Endorsement  in  blank ; 

(b)  Special  endorsement; 

(c)  Restrictive  endorsement : 

(d)  Qualified  endorsement; 

(e)  Conditional  endorsement? 

5.  As  to  drafts,  what  are: 

(a)  Sight  drafts; 

(b)  Time  drafts; 

(c)  What  is  a  bill  of  exchange  with  documents  attached? 
What  documents  would  you  expect  to  find  on  a  ship- 
ment of,  say,  tea  from  Japan  ? 

6.  In  case  of  unreasonable  delay  in  presenting  a  bill  of  ex- 
change what  would  be  the  effect? 

7.  A  debtor  wrote  to  his  creditor  enclosing  a  check  for 
$250.00,  "in  full  settlement  of  your  claim,"  the  amount  claimed 
being  $275.00.  The  creditor  endorsed  the  check,  paid  it  into  his 
bank  and  sent  the  debtor  a  receipt  for  $250.00  "on  account,"  re- 
questing payment  of  the  balance.  Under  these  circumstances  is 
the  creditor  estopped  from  denying  that  the  check  was  taken  in 
satisfaction  of  his  claim? 

8.  What  are  the  requisites  to  constitute  a  valid  legal  tender 
in  discharge  of  a  debt  when  the  amount  is  in  dispute  ? 

9.  What  is  the  extent  and  nature  of  the  liability  incurred 
by  a  director  who  is  a  party  to  the  payment  of  dividends  out  of 
capital?  What  is  the  position  of  a  shareholder  who  receives  a 
dividend  with  knowledge  that  it  is  so  paid? 

10.  What  practical  objects  are  served  by  reducing  the  paid- 
up  capital  of  a  company  on  the  ground  that  capital  has  been  lost  or 
is  not  represented  by  available  assets? 

11.  If  a  bill  or  note  is  taken  by  a  creditor  in  payment  of 
money  due  under  a  contract,  is  such  payment  considered  to  be 
conditional  or  absolute  ?    Give  an  instance. 

12.  Can  a  corporation  be  bound  by  a  contract  entered  into 
before  its  incorporation  ?    Give  your  reasons  for  your  answer. 

13.  How  may  the  remedy  be  revived  where  the  right  of 
action  on  a  contract  has  become  barred  by  lapse  of  time  ? 


: 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  C 


Code  :    Hill 

Outline  a  pay  roll  system  for  a  Logging  Camp,  the  men 
being  paid  monthly.  The  company  conducts  a  store,  from 
which  purchases  are  made  by  the  men;  company  also  makes 
the  men  cash  advances,  supplies  medical  attendance  on  an 
assessment  basis,  and  board  at  a  rate  a  week.  It  reimburses 
itself  from  the  Pay  Roll  before  distribution. 

Arrange  the   Pay  Roll   so  that  the   labor  costs  of  each 
operation  in  Logging  are  distinctly  shown. 


: 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  C 


Code  :    Hinder 

A  lumber  company  owns  its  own  timber  lands  end  an 
operating  saw  mill,  a  planing  mill,  a  shingle  mill  and  a  sash 
and  door  factory.  It  conducts  its  own  logging  operations,  but 
also  finds  it  convenient  to  buy  logs  which  may  be  obtained 
either  delivered  at  its  saw  mill,  or  at  other  points.  When 
purchased  logs  are  not  delivered  at  its  mill  it  is  customary 
for  the  company  to  do  its  own  towing  with  its  own  tugs. 

Required — an  outline  of  the  Profit  and  Loss  Account  of 
such  a  company  with  the  main  features  set  forth  in  such 
subsidiary  statements  as  you  think  necessary  in  order  that 
a  comprehensive  view  of  the  results  of  the  various  operations 
may  be  obtained. 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  C 


Code  :    Hobby 

Following  is  a  list  of  the  accounts  appearing  on  the  trial 
balance  of  a  manufacturing  company  which  deals  in  finished 
merchandise  purchased  as  well  as  in  its  own  products.  From  this 
list,  and  without  using  figures,  draw  up  plans  of  financial  state- 
ments (balance  sheet,  manufacturing  account,  profit  and  loss  ac- 
count, etc.)  in  the  form  which  you  think  most  suitable: 


Accounts  Payable 

Capital  Stock 

Bills  Receivable 

Cash 

Salaries,  Management 

Bills  Payable 

Salaries,  Office  and  Store 

Real  Estate 

Fuel 

Insurance  (plant) 

Light 

Freight  (on  mdse  purchased) 

Machinery  and  Tools 

Freight  (on  raw  materials) 

Buildings 

Sales  (own  products) 

Inventory,  own  products 

Inventory,  raw  materials 

Inventory,  partly  manufactured 

goods 
Inventory,  merchandise  purchased 
Inventory,  repair  supplies 
Sales  (merchandise  purchased) 
Undivided  Profits  (end  of  last 

year) 
Purchases  (merchandise) 
Rent,  Factory 
Rent,  Store  and  Office 


Printing  and  Stationery 

Accounts  Receivable 

Advertising 

Purchases    (raw   materials) 

Machinery  Repairs 

Producti/e  Labor  (Factory) 

Labor  (Warehouse) 

Office  Furniture 

Reserve  for  Bad  and  Doubtful 

Accounts 
Reserve  for  Depreciation 
Insurance  (Merchandise) 
Bad  and  Doubtful  Accounts 
Travellers'  Expenses  and  Salaries 
Management  Salary,  Factory 
Management  Salary,  Office 
Discounts  Allowed 
Interest  Payable 
Depreciation 
Goodwill 

Sundry  Factory  Expenses 
Sundry  Office  Expenses 
Postage 

Subscriptions  and  Donations 
Discount  Received 
Rents  (Receivable) 
Insurance  unexpired — Plant 
Insurance  unexpired — Merchandise 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  C 


Code :    Ibex 

On  January  1,  1913,  the  *'AB"  Company  owned  90%  of 
the  stock  of  the  "XY"  Company  and  80%  of  that  of  the  "PQ" 
Company,  two  subsidiary  companies  which  it  thus  controlled, 
and  in  fact,  actually  directed  the  policy  and  general  administra- 
tion, the  minority  holdings  in  each  case  being  in  the  hands  of  the 
officers  and  employes  of  the  subsidiary  company  or  of  other 
interests  friendly  to  the  "AB"  Company.  On  June  30,  1913,  the 
holdings  in  the  "XY"  Company  were  reduced  to  80%  by  the 
sale  of  100  shares  at  $200.00  per  share,  to  certain  employees  not 
theretofore  stockholders,  while  in  the  case  of  the  "PQ"  Company, 
owing  to  the  resignation  of  an  officer,  his  holdings,  consisting  of 
100  shares,  were  purchased  at  par,  the  holdings  by  the  "AB" 
Company  being  thus  increased  to  90^^,  so  that  on  December  31, 
1913,  the  proportion  of  holdings  in  the  two  companies  was  just 
reversed. 

The  following  are  the  trial  balances  of  all  three  companies 
after  closing  at  December  31,  1913 : 

TRIAL  BALANCE  AT  DECEMBER  31,  1913 
Particulars—  "A.  B."  Co.  "X.  Y.  "  Co.  "P.  Q."  Co. 

Properties  $  $  $  85,000  $  $  75,000  $ 

Goodwill   100,000 

Stockholdings — 
In  *'X.  Y."  Co.— 

800  shares  (book  value)....  115,000t 
In  "P.  Q."  Co.— 

900  shares  at  cost 82,000 

Current  assets  132,000  136,000  90,000 

Capital  stock — 

"A.  B."  Co.,  3000  shares 300.000 

"X.  Y."  Co.,  1000  shares 100,000 

"P.  Q."  Co.,  1000  shares 100,000 

Accounts   payable   125,000  30,000  10,000 

Surplus  at  Jan.  1 50,000  60,000  10,000 

1913  profits  44,000*  45,000  35,0p0 

Dividends  paid  in  Dec,  1913...     30,000  40,000  25,000 

Current  accounts  60,000  25,000  35,000 

$519,000  $519,000     $260,000  $260,000     $190,000  $190,000 

tAfter  crediting  the  proceeds  of  the  100  shares  sold,  prior  to  which  the  investment 
had  been  valued  at  cost. 

•Dividends  received  from  subsidiary  companies,  less  expenses  of  parent  company. 

First,  prepare  a  table  showing  the  book  value  of  subsidiary 
companies'  stock  at  each  important  date. 

Second,  journalize  '*AB's"  books  to  show  changes  in  its 
values  of  the  stocks. 

Third,  prepare  Consolidated  Balance  Sheet,  showing  cor- 
rectly— 

The  liability  to  the  minority  stockholders   in   respect  of 

their  equity. 
The  proportion  of  surplus  and  profits  appertaining  to  the 

stockholders  of  the  "AB"  Co. 
The  goodwill  of  the  combined  companies. 
Assume  that  the  profits  earned  by  the  "XY"  Co.  and  "PQ" 
Co.  respectively  to  June  30,  1913,  were  exactly  50%  of  the  profits 
for  the  complete  year. 


: 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  C 


Code :    Ice 

On  January  1,  1916,  a  corporation,  the  "C"  Company,  was 
formed  with  a  capital  stock  of  $6,000,000,  of  which  $5,000,000 
was  common  stock  and  $1,000,000  was  preferred  stock.  The 
"C"  Company  as  of  January  1,  1916,  purchased  the  capital  stocks 
of  the  "A"  and  "B"  Companies,  balance  sheets  of  which  at  De- 
cember 31,  1915,  are  shown  below.  The  preferred  stock  of  the 
"C"  Company  was  sold  to  the  public  for  cash  at  par,  the  stock- 
holders of  the  **A"  Company  received  the  entire  $5,000,000  of 
the  common  stock  of  the  "C"  Company  for  their  holdings  in  the 
"A"  Company,  while  the  stockholders  of  the  "B"  Company  were 
paid  $500,000  in  cash  for  their  holdings  in  the  "B"  Company. 

Prepare  a  consolidated  balance  sheet  showing  the  financial 
position  of  the  "C"  Company  as  of  January  1,  1916,  after  giving 
effect  to  the  foregoing  transactions.  Your  working  papers  should 
show  the  process  by  which  you  arrive  at  the  final  balance  sheet 
figures. 

It  also  should  be  understood  that  the  "A"  Company  had  in  its 
inventory  at  December  31,  1915,  materials  valued  at  $250,000, 
purchased  from  the  "B"  Company  on  which  the  "B"  Company 
had  made  a  gross  profit  of  20%. 

"A"    COMPANY 
BALANCE  SHEET— DECEMBER  31,  1915 


ASSETS 
Real  estate,  buildings,  machinery 

and   equipment   — $1,000,000 

Inventories    1,500,000 

Accounts  receivable  500,000 

Cash    50,000 

Prepaid  insurance  and  taxes 10,000 


LIABILITIES 

Capital  stock — 15,000  shares, 

$100  each  $1,600,000 

Notes  payable — 

"B"  Company  100,000 

Others    400,000 

Accounts  payable — 

"B"    Company    100,000 

Others    700,000 

Surplus    260,000 


$3,060,000 

"B"  COMPANY 
BALANCE  SHEET— DECEMBER  31,  1915 


$3,060,000 


ASSETS 
Real  estate,buildings,   machinery 

and  equipment $  250,000 

Inventories 75,000 

Accounts  receivable — 

"A"   Company    100,000 

Others    50,000 

Cash    25,000 

Prepaid  insurance  and  taxes 2,000 


LIABILITIES 
Capital  stock — 1000  shares,  $100 

each    $    100,000 

Accounts    payable   140,000 

Surplus    262,000 

Contingent  liability  in  respect  of 
notes  of  "A"  Company  dis- 
counted at  banks 

$100,000 


$    502,000 


$    502,000 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  C 


Code  :    Icelander 

Three-fourths  of  the  capital  stock  of  Company  "A"  and  two- 
thirds  of  the  capital  stock  of  Company  "B"  is  owned  by  the  hold- 
ing Company'^C'*.  Company  "C"  purchased  the  above  stock  of 
Company  "A"  at  $150  on  February  1st,  1905,  on  the  basis  of  the 
balance  sheet  given  below,  dated  January  1,  1905: 


ASSETS 
Real  estate,  plant,  machinery,  etc..  $100,000 

Inventory  merchandise  100,000 

Accounts  and  bills  receivable 75,000 

Cash    25,000 


LIABIUTIES 

Capital   stock  $150,000 

Bills  payable 75,000 

Surplus    75,000 


$300,000 


$300,000 


During  the  year  1905,  Company  "A"  made  a  net  profit  after 
providing  for  depreciation,  bad  debts,  etc.,  of  $5,000.00,  and  the 
directors  of  Company  "A"  declare  and  pay  a  dividend  of  10  per 
cent,  as  of  February  15,  1906. 

The  stock  of  Company  "B"  owned  by  Company  "C"  was  pur- 
chased on  March  1st,  1905,  at  125  on  the  basis  of  the  balance  sheet 
below,  dated  January  1,  1905: 


ASSETS 
Real  estate,  plant,  machinery,  etc.. .$450,000 

Patents    50,000 

Inventory  merchandise  200,000 

Accounts  receivable  150,000 

Cash     37,500 


LIABILITIES 

Capital   stock  $500,000 

Bonded   indebtedness  200,000 

Accounts   payable   62,500 

Surplus    , 125,000 


$887,500 


$887,500 


During  the  year  1905,  Company  "B"  makes  a  net  profit  of 
$50,000.00  after  making  all  necessary  provisions  for  depreciation 
on  plant,  machinery  and  patents,  a?  also  for  bad  debts,  and  tho 
directors  of  Company  "B"  declare  and  pay  a  dividend  of  8  per 
cent,  as  on  February  14,  1906. 

Draw  up  all  the  necessary  entries  in  respect  to  the  dividends 
of  the  above  two  companies  as  they  should  appear  on  the  books 
of  Company  "C",  the  holding  company.     State  reasons  therefor. 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  C 


Code  :    Icicle 

The  Jones  Investment  Co.,  on  June  30,  1915,  obtained  a 
controlling  interest  in  three  operating  companies,  viz.,  "A"  Co., 
"B"  Co.,  and  "C"  Co. 

The  Balance  Sheets  of  the  four  companies  as  at  June  30, 
191()  are  as  follows : 

Debits  Tones  Invest- 

ments Co.  "A"  Co.  "B"  Co.        "C"  Co. 

Investment  in  other  companies 

"A"  Co.— 60%  interest 

(Cost    $900,000.00)    $1,000,000.00     $  |  $ 

"B"  Co— 75%  interest  at  cost      600,000.00 

"C"  Co.— 80%  interest  at  cost      400,000.00 

Advances  to  "A"  Co 100,000.00 

Advances  to  "C"  Co 50,000.00 

Cash    50,000.00  100,000.00         10,000.00         50,000.00 

Accounts   Receivable  100,000.00         50,000. 00       100,000.00 

Inventories  2^0,000.00       100,000.00         50,000.00 

Plant  1,000,000.00       600,000.00        400,000.00 

Deficit  40,000.00 

Total   Debits   .$2,200,000.00     $1,400,000.00     $800,000.00     $600,000.00 

Credits 

Capital  Stock  $2,000,000.00  $1,000,000.00  $800,000.00     $400,000.00 

Jones  Investment  Co 100,000.00  60,000.00 

Surplus     200,000.00  300,000.00  l.'iO.OOO.OO 

Total    Credits    $2,200,000.00     $1,400,000.00     $800,000.00     $600,000.00 

The  Surplus  and  Deficit  Ac- 
counts as  shown  above  may 
be  analyzed  as  follows: 

Balance  to  June  30,    1915 $100,000.00        $200,000.00       $  4,000.00     $100,000.00 

Surplus  income: 

6  months  to  Dec.   31,  1916....  180,000.00         46,000.00         25,000.00 

6  months  to  June  30,  1916....      217,600.00  220,000.00         40,000.00*       26,000.00 

Increase    in    value    of    "A"    Co. 

Stock  100,000.00 

Dividends   paid   Jan.,   1916 217,600.00*        300,000.00*       50,000.00* 

Balance  June  30,  1916 $200,000.00        $300,000.00       $40,000.00*  $150^000^)0 

Debits  indicated  by  * 

Prepare  a  consolidated  balance  sheet  of  the  four  companies 
as  at  June  30,  1916. 

A  statement  of  the  consolidated  earnings  and  surplus  account 
for  the  year  to  June  30,  1916,  is  not  required,  but  may  be  sub- 
mitted if  desired. 

In  preparing  the  balance  sheet  the  following  additional  facts 
should  be  considered : 

1.  The  holding  company  has  no  other  source  of  income  than 
the  dividends  from  the  subsidiaries,  which  have  been  taken  on 
to  its  books  when  received. 

2.  In  accordance  with  a  resolution  of  the  Board  of  Directors 
of  the  Jones  Investment  Co.,  the  following  entry  was  made  on 
the  holding  company  books  at  June  30,  1916 : 

Dr.     Investment  in  "A"  Co $100,000.00 

Cr.     Surplus  $100,000.00 

3.  The  inventories  of  the  "A"  Co.  include  $100,000.00  of 
stock  purchased  from  "B"  Co.  in  1916  The  cost  of  these  goods 
to  the  "B"  Co.  was  $90,000.00. 

4.  Part  of  the  plant  of  the  "C"  Co.  was  built  by  the  "A"  Co. 
in  September  and  October,  1915,  at  a  cost  of  $80,000.00.  For  this 
work  the  "A"  Co.  charged  the  "C"  Co.  $95,000.00. 

5.  In  February,  1916,  part  of  the  equipment  of  the  "B"  Co., 
which  was  carried  on  the  books  at  the  cost  price  of  $50,000.00, 
was  destroyed  by  fire.  The  only  entry  that  has  been  made  in  re- 
spect to  this  loss  was  to  credit  the  Plant  Account  with  the  salvage 
of  $5,000.00. 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  C 


Code  :   Icing 

The  following  are  the  Balance  Sheets  of  two  companies 
which,  carrying  on  similar  businesses,  have  decided  to  amalgamate 
on  the  basis  that  the  goodwill  and  assets  (except  the  shares  of 
**Y.  Z/'  Minmg  Company  held  by  the  "A.  B."  Mining  Company) 
are  of  equal  value.  How  would  you  recommend  that  the  amalga- 
mation should  be  effected? 

State  two  possible  methods,  with  full  explanation  of  your 
reasons,  and  give  in  each  case  the  Balance  Sheet  of  the  amalga- 
mated company. 

THE  "A.  B."  MINING  COMPANY 
Balance  Sheet  at  December  31st,  1907 


Assets 
Cost  of  Mines  and  Other  As- 
sets     $    250,000 

Shares  in  the  "Y.  Z."  Mining 
Company,     1250     shares    of 

$100.00    each,    costing 187,500 

Accounts   Receivable   5,000 

Cash  2,600 

Stock  of   Minerals 5,000 


Liabilities 

Accounts  Payable  $      12,500 

Creditors  for  cost  of  purchase 
of  1250  shares  in  the  "Y.Z." 
Mining  Company  (per  con- 
tra)          187,500 

Capital   Stock,   2500  shares  of 

$100.00   each   250,000 


$    450,000 


$    450,000 


THE  "Y.  Z."  MINING  COMPANY 

Balance  Sheet  at  December  31st,  1907 

Assets  Liabilities 

Cost  of  Mines  and   Other  As-  Accounts    Payable   $      10,000 

sets    $  250,000             Capital   Stock,   2500   shares  of 

Stock  of  Minerals 2,500  $100.00  each   250,000 

Accounts  Receivable  5,000  

Cash  2,600                                                                     $    260,000 


$    260,000 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  C 

Code  :    Icy 

1.  A  company  has  a  factory  which  is  carried  on  as  a  distinct 
business,  with  a  separate  banking  account.  The  head  office  deals 
with  the  factory,  buys  goods  from  it  and  pays  for  them,  as  if  it 
were  a  separate  business,  and  the  factory  sells  to  the  head  office 
at  the  same  price  as  it  does  to  outsiders.  At  the  end  of  the  year, 
'=eparate  Trading  Accounts  are  prepared  for  the  factory  and  for 

he  head  office ;  the  balances  are  carried  to  a  Joint  Profit  and  Loss 
Account  and  a  Joint  Balance  Sheet  is  prepared. 

The  stock  at  the  head  office  consists  largely  of  goods  bought 
from  the  factory.  On  what  basis  do  you  consider  this  should  be 
valued  and  why? 

2.  What  is  the  Budget  System  and  what  is  its  relation  to  the 
finances  of  a  municipality?  Give  your  opinion  regarding  it  and 
what  you  would  recommend  (if  anything)  in  its  place? 

3.  In  the  accounts  of  a  Public  Service  Corporation  how 
would  you  treat : 

(a)  Interest  on  bonds  during  construction; 

(b)  Interest  on  bonds  after  the  construction  period; 

(c)  Interest  received  on  money  from  proceeds  of  bond  sales 
loaned  on  call,  because  not  immediately  required  for  construction ; 

(d)  Discount  on  bonds  sold; 

(e)  $100,000.00  in  capital  stock  given  for  property  of  an 
appraised  value  of  $75,000.00. 

4.  Explain  briefly  what  is  meant  by  the  exchange  value  of  a 
foreign  currency.    Why  does  it  vary  from  time  to  time? 

5.  On  the  formation  of  a  corporation  to  take  over  an  estab- 
lished business,  it  frequently  happens  that  a  considerable  sum  is 
paid  for  goodwill.  Give  an  instance  where  you  would  consider  it 
necessary  that  yearly  provision  should  be  made  ou:  of  profits  to 
extinguish  the  asset,  and  a  further  instance  where  yon  would  con- 
sider such  a  course  unnecessary,  and  state  your  reasons. 

6.  A  corporation  has  removed  its  business  to  a  new  factory 
which  has  cost,  including  the  plant  site,  $150,000.00.  A  portion  of 
the  machinery  and  plant,  at  an  estimated  value  of  $70,000.00,  has 
been  removed  to  the  new  factory  at  a  cost  of  $9,000.00.  The  re- 
mainder has  been  sold,  showing  a  loss  on  the  total  book  value 
of  the  machinery  and  plant  o-f  $16,000.00.  The  profits  for  the 
year,  after  making  provision  for  depreciation  of  71/2%  on  the 
machinery  and  plant,  are  $22,500.00,  without  taking  into  account 
the  above  named  loss,  and  are  about  the  normal  amounts  of  profits 
in  previous  years. 

State  your  views  as  to  the  proper  mode  of  dealing  with  the 
cost  of  removkl  and  the  loss  on  the  sale  and  whether,  apart  from 
financial  considerations,  the  directors  would  be  justified  in  declar- 
ing a  dividend. 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  C 


Code :    Idea 

From  the  following  trial  balances,  after  ciosing,  prepare  a 
Consolidated  Balance  Sheet  as  at  January  31,  1915.  This  Con- 
solidated Balance  Sheet  must  be  prepared  in  form  suitable  for 
submission  to  a  firm  of  commercial  paper  brokers  and  to  bankers. 

It  is  assumed  that  you  audited  all  these  balance  sheets  and 
had  every  opportunity  of  inquiring  and  satisfying  yourself  rela- 
tive to  their  accuracy.  This  being  so,  append  to  the  Balance 
Sheet  such  a  certificate  as  you  would  feel  warranted  in  signing. 


"A.  B.  C."  MANUFACTURING  COMPANY 
Trial  Balance — after  closing — as  at  January  31,  1915. 


Dr. 

Real  estate,  buildings,  machinery,  etc $1,000,000.00 

Good  will  - 1,000.000.00 

Investment  in   and  advances  to   Paris   Manu- 
facturing Company : 
Capital   stock — at   book   value 
at  beginning  of  fiscal  period..$250,000.00 

Advances  150,000.00  400,000.00 

Accounts  receivable,  less  reserve,  $10,000 150,000.00 

Inventories  of  raw  material,  work  in  process, 

finished  material,  etc 300.000.00 

Cash   50,000.00 

Notes  payable 

Accounts  payable  

Investment  in   and  advances  to 
Brown-Smith  Company: 
Capital   stock — book   value   at 

beginning  of  fiscal  period $100,000.00 

Advances 100,000.00  200.000.00 


Cr. 


$ 


250,000.00 
50,000.00 


First  mortgages  (f/r  gold  bonds 

Preferred  stock — 7%  cumulative,  10,000  shares 

Common  stock — 10,000  shares 

Surplus    


500.000.00 
1,000.000.00 
1,000,000.00 

300.000.00 


$3,100,000.00       $3,100,000.00 

PARIS  MANUFACTURING  COMPANY 
Trial  Balance — after  closing — as  at  January  31,  1915 

Dr.  Cr. 

Real  estate,  buildings,  machinerv,  etc $250,000.00        $ 

Goodwill  200,000.00 

Accounts  receivable  60,000.00 

Inventories    of    raw    material,    work    in    process, 

finished  materials,  etc 175,003.00 

Cash  25,000.00 

Reserve  for  bad  debts 10,000.00 

Notes  payable 90.000.00 

Accounts  payable  10,000.00 

"A.  B.  C."  Manufacturing  Company 150,000.00 

Capital  stock— 1,500  shares 150.000.00 

Surplus    300,000.00 

$710,000.00        $710,000.00 


« 


(Continued  on  next  page.) 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  C 


Code:    Idea — (Continued) 

BROWN-SMITH  COMPANY 
Trial  Balance— after  closing— as  at  January  31,  1915 

Dr.  Cr. 

Real  estate,  buildings,  machinery,  etc $  50,000.00       $ 

Accounts  receivable  25,000.00 

Finished  goods  on  consignment — at  selling  price....  100,000.00 
Inventories    of   raw    material,    work    in    process, 

finished  materials,  etc 125,000.00 

Cash  25,000.00 

Notes  payable 150,000.00 

Accounts  payable  25,000.00 

"A.  B.  C."  Manufacturing  Company 100,000.00 

Capital  stock— 1,000  shares 100,000.00 

Deficit    50,000.00 

$375,000.00       $375,000.00 

In  preparing  the  Balance  Sheet  required,  bear  the  following 

facts  in  mind: 

The  dividends  on  the  preferred   stock  of  the   "A.   B.   C." 

Manufacturing  Company  were  paid  to  March  31,  1914. 

The  finished  goods  on  consignment  (Brown-Smith  Balance 
Sheet)  cost  to  manufacture  $60,000.00.  On  realization  it  is  esti- 
mated a  profit  of  $10,000.00  will  be  made.  Disregard  any  freight 
expense. 

All  inventories  are  priced  on  proper  basis.  All  accounts  re- 
ceivable are  considered  collectible  after  allowing  for  reserves. 


•A* 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  C 


Code :   Ideal 

You  are  called  upon  by  the  Secretary  of  the  Wisconsin  Manu- 
facturing Co.,  at  Milwaukee,  to  close  the  books  for  the  year  1915 
.and  assist  him  in  preparing  his  annual  report.  He  informs  you 
that  the  company  was  organized  January  1,  1914,  to  manufacture 
and  market  a  specialty  and  that  it  operates  its  own  factory  at 
La  Crosse. 

Sales  are  confined  to  dealers,  and  are  made  from  the  factory, 
from  the  main  office  at  Milwaukee,  and  from  a  branch  at  Kenosha. 

The  Secretary's  report  of  December  31,  1914,  did  not  correctly 
state  the  result  of  operations  during  the  first  year  as  no  provision 
was  made  for  anticipated  profits  and  discounts  in  inventories. 
There  is  not  enough  time  before  the  annual  meeting  to  visit  the 
other  offices  of  the  company  and  examine  the  books  and  records 
there,  but  you  are  asked  to  prepare  statements,  based  upon  the 
books  at  the  Milwaukee  office  and  reports  received  from  the  fac- 
tory and  branch  Tianagers  showing: 

1.  The  condition  of  the  company  December  31,  1915. 

2.  The  cost  of  production  during  1915. 

3.  An  income  and  expense  statement  of  the  business  as  a  whole 

for  the  year  1915. 
In  addition  to  the  main  office  books,  the  following  papers  and 
information  are  placed  at  your  disposal: 

TRIAL  BALANCE— FACTORY  LEDGER 
(Before  Closing) 

WISCONSIN  MANUFACTURING  CO. 
December  31,  1915 

DR,  CR. 

Mil>vaukee  office    $  $  20893  49 

Cash  „ 8,268.00 

Accounts   receivable   22,843.00 

Notes   receivable  3^866.00 

Sales V 923.485.33 

Freight  10,551.07 

Raw  materials— Jan.  1,  1915 34,071.94 

Raw  materials — Purchases 375.142.84 

Expense   494,617.89 

Commissions  4,233.30 

Coal  2,900.00 

Waste   ^  12,115.22 

$956.494.04    $956,494.04 

ANALYSIS    OF   EXPENSE— FACTORY    LEDGER 

Labor  _ $363,237.53 

Factory  expense  107,855.17 

Selling  expense  .._ 23,988.70 

$495,081.40 
Interest  on  bank  account 463.51 

$494,617.89 

ANALYSIS  OF  FREIGHT  ACCOUNT— FACTORY  LEDGER 

Freighx  on  PiKrhases $    7,357.78 

Freight  oi    SaW  3,193.29 

$  10,551.07 

Accrued  wages  amounting  to  $2,145.00  were  not  included  in  the  above 
trial  balance. 

(Continued  on  next  page.) 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  C 


Code  :    Ideal —  ( Continued ) 

TRIAL  BALANCE— MILWAUKEE  LEDGER 

WISCONSIN  MANUFACTURING  CO. 

December  31,  1915 

DR.  CR. 

La  Crosse  account $  20,893.49     $ 

Kenosha  account  23,836.00 

Buildings— Factory  (5%) 80,000.00 

Buildings— Milwaukee    (2}^%)    50,000.00 

Machinery  (8%)  65,000.00 

Furniture  and  fixtures.  La  Crosse  (10%) 2,500.00 

Furniture  and  fixtures,  Milwaukee  (10%) _  4,500.00 

Capital  stock  500,000.00 

Treasury  stock 1,750.00 

Reserve  for  depreciation  11,150.00 

Surplus  29,774.62 

Dividend  payable  15,000.00 

Cash    60,711.95 

Accounts   receivable  63,231.34 

Notes  receivable — Trade  41,976.55 

Notes  receivable— Personal  18,000.00 

Accounts  payable   77,110.55 

Merchandise  purchases  829,085  60 

Freight  in  15,835.55 

Sales   „ 1,165,596.66 

Discount  on  sales 12,002.44 

Freight  out  46,766.66 

Expense— Selling  369,196.93 

Expense — Administrative  1 12,41 1.65 

Taxes  (1915)— L^t  Cros.se 3,933.67 

Taxes    (1915)— Milwaukee   3,260.00 

Discount  on  factory  purchases  26,260.00 

$1,824,891.83     $1,824,891.83 

INVENTORIES 
WISCONSIN  MANUFACTURING  CO. 

Dec.  31, 1915     Dec.  31, 1914 
Factory : 

Materials  at  invoice  price  $     79,187.91     $     34,071.94 

Finished  goods  at  invoice  price  to  Milwau- 
kee office 22,992.60 

In  process,  at  cost : 

Materials   19.033.86 

Labor  18,219.13 

Expense — Estimated   5,465.74 

Coal  2,900.00 

Waste   3,726.43 

Milwaukee : 

Finished  gords  at  factory  invoice  price 186,877.18  49.903.56 

Kenosha : 

Finished  goods  at  selling  price 14,270.00 

Accounts  receivable  6,580.00 

In  the  cour.se  of  your  work,  you  find  that  uniform  selling  prices 
are  maintained  at  all  offices  of  the  company  and  that  goods  are* 
billed  at  a  fixed  factory  price  to  the  MilwaMkee  office  which  rebills 
all  shipments  to  the  Kenosha  office  at  selling  price.     The  Mil- 
waukee office  pays  all  bills  for  materials  purchased  by  the  factory. 

The  factory  office  keeps  separate  records  for  manufacturing 
and  selling  expenses,  but  dealers'  orders  received  at  La  Crosse  are 
filled  directly  from  the  factory  stock  of  finished  floods  and  are 
credited  to  the  same  account  as  shipments  to  Milwaukee. 

(Continued  on  next  page.) 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  C 


Code  :    Ideal —  ( Concluded ) 

The  Kenosha  office  handles  its  own  collections,  but  keeps  only 
a  single  entry  record  which  is  not  available  at  this  time.  Expenses 
are  paid  out  of  collections  and  tne  balance  is  sent  to  Milwaukee. 
Freight  on  shipments  to  Kenosha  is  paid  at  Milwaukee.  The 
Kenosha  manager  is  allowed  5  per  cent  commission  on  collections 
and  cash  sales,  but  no  salary. 

Rates  of  depreciation  on  permanent  assets  have  been  fixed  by 
the  Board  of  Directors  and  appear  on  the  trial  balance  of  the 
Milwaukee  ledger.  All  depreciation  for  the  year  1914  was 
charged  to  the  Milwaukee  profit  and  loss  account,  which  also 
received  credit  for  discounts  on  factory  purchases. 

One-third  of  the  floor  space  and  three-fifths  of  the  furniture 
at  Milwaukee  are  used  for  administrative  purposes. 

The  treasury  stock  consists  of  ten  shares,  par  value  $1,000.00, 
purchased  October  1,  1915,  and  will  not  be  resold. 

You  are  instructed  to  figure  in-freight  for  inventory  purposes 
at  2  per  cent  of  purchase  invoice  price  at  the  various  offices. 
The  over  head  on  work  in  process  has  been  estimated.  With  these 
exceptions  inventories  are  to  be-considered  at  net  cost. 

The  following  is  an  analysis  of  the  Kenosha  account  as  it 
appears  on  the  Milwaukee  ledger: 

DEBITS 

Shipments   $     61,850.00 

Freight   1,237.00     $     63,087.00 

CREDITS 

Cash    $     27,934.87 

Expense   11,316.13  39,251.00 

$23,856.00 

The  not?  receivable  for  $18,000.00  represents  a  loan  to  the 
president  of  the  company  to  be  repaid  out  of  dividends. 

A  dividend  of  $30,000.00  was  declared  March  1,  1915,  to  be 
paid,  one-half  September  1,  1915,- and  one-half  March  1,  1916. 

Taxes  at  La  Crosse  for  the  year  1914,  amountin*^  to  $4G5.00, 
were  included  in  administrative  expense  at  Milwaukee. 

The  factory  production  during  1914  was  reported  by  the  La 
Cross  office  as  $283,181.81  at  cost  and  was  billed  to  Milwaukee 
at  $318,401.00.  Factory  purchases  of  materials  were  $131,646.44 
in  1914  and  the  discounts  amounting  to  $7,898.79  were  treated  as 
income  of  the  Milwaukee  office.  All  freights  were  charged  to 
expense. 

Working  papers  should  accompany  your  solution. 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  C 


Code  :    Identify 

Compile  from  the  following  particulars,  supplied  by  the 
branches,  an  account  with  each  branch  in  the  books  at  the  head 
office  of  the  Wholesale  Co.,  whose  year  ends  December  31,  1909, 
bringing  down  the  balances  as  they  should  appear  on  January 
1,  1910. 

The  branches  receive  all  their  goods  from  the  head  office  and 
pay  in  all  of  their  cash  every  day.  They  keep  their  own  sales 
ledgers  and  do  their  own  collecting.  All  payments  for  wages  and 
expenses  at  the  branches  are  drawn  by  check  from  the  head 
office  on  the  Imprest  system. 

A  B 

Merchandise  received  from  head  office $10,360.00  $10,730.00 

Cash  received  from  customers 11,450.00  10,340.00 

Allowance  to  customers  15.00  35.00 

Returns  from  customers 75.00  20000 

One  year's  sales  to  Dec.  31,  1909 10,87000  12,605.00 

Cash  sales 8,400.00  5,700.00 

Bad  Debts „ 280.00  530.00 

Inventory  of  Mdse.  at  Jan.  1,  1909 2,300.00  2,500.00 

Debtors  at  January  1,  1909 8,270.00  5,730.00 

Debtors  at  December  31,  1909 7,320.00  8,760.00 

Inventory  at  December  31,  1909 3,750.00  4,320.00 

Rent  and  Taxes  paid 600.00  730.00 

Wages  and  other  expenses  2,020.00  2,310.00 


(b) 

(a) 
(b) 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  C 

Code  :     Idiocy 

1.  Give  some  of  the  essential  features  of  a  Common  Law 
Partnership. 

2.  Does  a  participation  in  the  profits  of  a  firm  make  the 
person  a  partner? 

3.  What  courts  have  jurisdiction  in  bankruptcy  proceed- 
ings? 

4.  "A"  being  a  member  of  a  partnership,  files  an  individual 
petition  for  voluntary  bankruptcy.  The  firm  has  no  assets.  Do 
the  partnership  creditors  share  with  '*A's"  individual  creditors  in 
the  distribution  of  his  estate? 

5.  (a)     Against  whom  may  a  petition  for  involuntary  bank- 
ruptcy be  filed? 

Who  may  file  a    petition    for    involuntary    bank- 
ruptcy ? 

What  is  negotiable  paper? 

What  is  accommodation  paper,  and  is  it  also  ne- 
gotiable ? 

7.  Supposing  **B"  gave  his  note  to  "A,"  to  assist  his  credit, 
and  "A"  endorsed  it  to  "C."  Would  "C,"  even  if  he  had  knowl- 
edge that  there  was  no  transaction  between  "A"  and  "B,"  recover 
against  "B"? 

8.  Name  circumstances  under  which  the  liability  on  an  in- 
strument would  be  discharged  as  to : 

(a),     a  primary  debtor; 
(b),     one  secondarily  liable. 

What  lien  rights  have  mechanics  and  material  men  for  wages 
and  materials? 

9.  What  are  the  limitations  by  law  for  the  collection  of 
debts. 

10.  What  are  some  of  the  exemptions  in  the  collection  of 
debts  ? 

11.  Give  some  of  the  essential  features  of: 

(a),  a  Private  Corporation;  (b),  a  Public  Service  Corpora- 
tion; (c),  a  Municipal  Corporation. 

12.  Outline  the  processes  of  organization  and  dissolution  of 
private  corporations. 

(13.     How  are  the  laws  of  the  State  of  Washington  enacted? 
14.    Define  the  following  legal  words  and  terms : 


1.  Notary  Public; 

2.  Trust  Deed; 

3.  Power  of  Attorney; 

4.  Certificate  of  Delinquency; 

5.  Foreclosure ; 

6.  Setoffs  and  Counterclaims; 

7.  Composition  with  Creditors; 

8.  Garnishment ; 

9.  Ultra  Vires; 
10.  Insolvency; 


11.  Common  Carrier : 

12.  Substantial  Performance; 

13.  Liability  of  Stockholders; 

14.  Abandonment ; 

15.  Insurable  Interest; 

16.  Fee  Simple  Title  ; 

17.  Statute  of  Limitations; 

18.  Deposition ; 

19.  Affidavit; 

20.  Quit  Claim  Deed. 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  C 

Code:    Idiom 

A  company  with  head  office  in  Chicago  and  factory  at  South 
Bend,  Indiana,  conducts  three  selling  branches  in  New  York, 
San  Francisco  and  Montreal,  which  are  supplied  with  goods  from 
the  factory,  the  invoices  being  sent  out  from  the  head  office. 

The  branches  keep  their  own  sales  ledgers,  send  out  monthly 
statements  to  customers  and  receive  cash  against  their  ledger 
accounts,  which  they  remit  weekly  to  Chicago. 

All  branch  expenses,  including  salaries  and  wages,  are  paid 
by  the  branches  from  petty  cash  accounts,  kept  at  a  fixed  balance 
of  $500.00,  by  draft  on  head  office. 

The  following  information  is  supplied  by  the  branches  at 
December  31,  1913,  summarizing  the  transactions  of  the  previous 
six  months  : 

New  York    San  Francisco  Montreal 

Rents  and  taxes  paid $     200.00  $     175.00  $       75.00 

Sales  for  6  months  to  Dec.  31,  1913....  12,500.00  11,800.00  10,225.00 

Salaries  and  wages 1,650.00  1,520.00  1,600.00 

Returned  sales  200.00  100.00  250.00 

Allowances   to   customers 50.00  40.00  30.00 

Bad  debts  125.00  60.00 

Cash  sales  6.250.00  5,380.00  6,100.00 

Cash  received  from  customers  on  led- 
ger accounts  10,85000  10,260.00  9,150.00 

Debtors,  July  1,  1913 5,820.00  6,140.00  7,240.00 

Debtors,  December  31,  1913 7,220.00  7,415,00  7,975.00 

Petty  cash  on  hand  July  1,  1913 500.00  500.00  500.00 

Petty  cash  on  hand  December  31,  1913  500.00  500.00  500.00 

Stock,  July  1,  1913 3,450.00  3.820.00  3,650.00 

Stock,  December  31,  1913 4,300.00  4,720.00  4,500.00 

Goods  received  from  head  office  fac- 
tory    11,500.00  10,240.00  10,350.00 

From  these  details,  prepare  branch  accounts  as  they  should 
appear  in  the  head  office  books  and  draw  up  a  final  general  trial 
balance  with  branch  profit  and  loss  accounts. 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  C 


Code  :    Idiot 

The  home  office  of  the  Wisconsin-St.  Louis  Sales  Company,  a 
sales  company  for  the  St.  Louis  Motor  Corporation,  is  at  Milwau- 
kee, but  it  has  selling  branches  in  both  Milwaukee  and  Madison. 

From  the  following  trial  balances  of  the  home  office  and  the 
Milwaukee  and  Madison  sales  offices  taken  on  March  31,  1917, 
prepare 

(a)  the  income  statement  of  the  Wisconsin-St.  Louis  Sales 
Company  for  the  quarter  ended  March  31,  1917 ; 

(b)  the  balance  sheet  of  the  company  at  the  close  of  business 
March  31,  1917. 

The  trial  balance  of  the  home  office  general  ledger  on  March 
iil,  1917,  is  as  follows: 

Bank  account   $  10,864.65    $ 

Madison  Branch  160,711.17 

Milwaukee  Branch  _ 259,900.01 

Unused  Stationery  16.65 

Furniture  and  Furnishings  130.04 

Claims — Factory  and  Customers  3,531.92 

Trade  Acceptances  

St.  Louis  Motor  Corporation ^ 

Illinois-St.  Louis  Co    » 1,252.66 

Capital  Stock  _ 

Interest  Earnings  

Interest  and  Exchange  194.60 

Telephone  and  Telegraph  88.38 

Executive  Salaries  ^ 1,950.00 

Traveling  Salaries  _ _ „ 750.00 

Executive  Expense _ 419.09 

Miscellaneous  Traveling  Expense  1,120.55 

Office  Salaries — General  1,073.95 

General  Office  Expense  551.59 


10,273.12 
331,867.89 

100,000.00 
414.25 


$442,555.26    $442,555.26 

Note :    For  the  purposes  of  this  problem,  the  individual  operating  ex- 
pense accounts  are  summarized  into  one  item,  Operating  Expenses. 

(Continued  on  next  page.) 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  C 


Code  :    Idiot —  (  Continued ) 

The  trial  balance  of  the  Milwaukee  Branch  on  March  31,  1917, 
is  as  follows : 


Petty  Cash  $ 

Bank  Account  

Accounts  Receivable _ 

Notes  Receivable  

Personal  Accounts _ 

Autos — Model  1  

Autos— Model  2 ".Z^ZZ.Z.. 

Refund  Certificate  Account 

Auto  Freight  and  Decking 

Inventory  Used  Cars 

Shop  Labor  

Automobile  Parts  

Freight— Auto  Parts  Received  ".. 

Miscellaneous  Merchandise  

Furniture  and  Furnishings  

Tools  and  Machinery  

Miscellaneous  Equipment  

Deposits  

Unearned  Fire  insurance _ _ 

Unearned  Liability  Insurance 

Unearned  Customers  Insurance 

Unearned  Customers  Disccunts  

Dealers  Car  Contract  Deposits  

Accounts  Payable  

Home  Office  Account  

Model  1  Sales 

Cost  of  Model  1  Sales 

Trade  Allowances  Model  1  

Model  2  Sales  

Cost  of  Model  2  Sales 

Trade  Allowance  Model  2 

Used  Car  Sales  

Cost  of  Used  Car  Sales  

Parts  Sales 

Cost  of  Parts  Sales  

Sales — Miscellaneous  Merchandise  

Cost  of  Sales — Miscellaneous  Merchandise 

Repair  Labor  Sales  

Cost  of  Repair  Labor  Sales  

Discount  Earned  

Interest  Earnings  

Profit  and  L(  ss  Adjustment  

Operating  Expenses  


1,000.00 

7,810.00 

68,303.47 

1,169.65 

251.75 

71,125.13 

46,713.25 

825.00 

8,497.83 

5,622.64 

1,339.24 

37,420.12 

67.73 

14.413.02 

1,844.14 

2,592.58 

148.29 

700.00 

333.07 

537.00 

10.00 


92,703.79 
1,304.00 

36,614.49 
1,020.00 

10,616.90 

10,932.42 

5,584.71 

1,698.90 


4,353.71 
19,089.11 


$ 


303.04 

6,808.57 

2,110.94 

259,900.01 

106,051.38 


43,939.84 

9,960.00 

14.068.77 

7,299.45 

3,379.48 

169.64 
650.82 


$454,641.94    $454,641.94 


(Continued  on  next  page.) 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  C 


Code  :    Idiot —  ( Concluded ) 

The  trial  balance  of  the  Madison  Branch  on  March  31,  1917, 
is  as  follows: 

Petty  Cash  $    1,000.00    $ 

Bank  Account  6,785.04 

Accounts  Receivable  30,029.08 

Autos  Model  1 A2jS^.(& 

Autos  Model  2  \    28,49521 

Refund  Certificate  Account 520.00 

Auto  Freight  and  Decking 6,326.23 

Inventory  Used  Cars ^ 13,265.53 

Shop  Labor  Account 463.82 

Automobile  Parts 25,429.34 

Freight— Auto  Parts  Received 267.82 

Miscellaneous  Merchandise  11,205.45 

Furniture  and  Furnishings  1,830.88 

Tools  and  Machinery  2,004.69 

Miscellaneous   Equipment  1,710.16 

Unearned  Fire  Insurance  59.83 

Unearned  Liability  Insurance 468.75 

Unearned  Customers  Insurance 405.80 

Unearned  Customers  Discounts 207.79 

Dealers  Car  Contract  Deposits  9,578.56 

Accounts   Payable 3,914.88 

Home  Office  _ 160^71  l!l7 

Model  1  Sales  85,528.94  • 

Cost  of  Model  1  Sales 74,803.67 

Trade  Allowance  Model  1 2,976.00 

Model  2  Sales  43,526.03 

Cost  of  Model  2  Sales 35,810.04 

Trade  Allowance  Model  2 1,865.00 

Used  Car  Sales  10,501.25 

Cost  of  Used  Car  Sales  10,373.25 

Parts   Sales  „.  9,803.57 

Cost  of  Parts  Sales  7,334.01 

Sales — Miscellaneous   Merchandise   5,715.98 

Cost  of  Sales — Miscellaneous  Merchandise 4,485.48 

Repair  Labor  Sales  „ 2,736.44 

Cost  of  Repair  Labor  Sales 1,368.21 

Discount   Earned  286.98 

Interest  Earnings  16.56 

Profit  and  Loss  Adjustment 2,506.89 

Operating  Expenses  19,869.53 

$333,397.77    $333,397.77 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  C 


Code  :    Idiotic 

The  general  ledger  of  a  County  Comptroller  at  the  close  of 
the  fiscal  year  shows  the  following  outstanding  balances : 

Debit  balances : 

General  Fund  $  3,600,000.00 

To  Balance  Bond  Liability 4,000,000.00 

Cash    950,000.00 

Due  from  Fee  Offices _ 250,000.00 

Appropriation  Expenditures 3,500,000.00 

Credit  Balances: 

Appropriation    ^ 3,600,000.00 

Bonds,  Series  A 500,000.00 

Bonds,  Series   B 750,000.00 

Bonds,   Series   C 600,000.00 

Bonds,  Series  D 1,500,000.00 

Bonds,  Series   E 650,000.00 

Bonds  and  Coupons  due  and  unpaid „ 30,000.00 

Warrants  outstanding  559,000.00 

Tavern  License  Fund  S,OOO.OG 

Laboratory  Fund  6,000.00 

General  Tax  Income  2,000,000.00 

Fee  Office  Income  1,600,000.00 

Surplus  „ 500,000.00 

Prepare  journal  entries,  closing  operations  for  the  year,  and  a 
classified  balance  sheet  as  at  the  close  of  the  year. 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  C 

Code:  Idler 

You  have  audited  the  books  of  a  social  club  and  find  that  the 
entrance  fees  have  been  credited  to  a  fixed  liability  account.  What 
position  would  you  take  as  to  the  correctness  of  this  procedure? 
Give  your  reasons. 

4>  *  4(  4c  « 

The  directors  of  a  manufacturing  corporation  insist  on  draw- 
ing a  considerably  larger  sum  for  remuneration  than  they  are 
entitled  to  and  one  of  their  number,  with  the  formal  consent  of 
his  co-directors,  borrowed  a  substantial  sum  of  money  from  the 
company  for  his  own  use.  Is  it  necessary  for  the  auditor  to  make 
any  reference  to  either  of  these  matters  in  his  report  if  the  state- 
ment issued  to  the  stockholders  discloses  the  amount  of  fees 
drawn  by  the  directors  and  also  discloses  the  fact  that  the  loan  is 
made  to  a  director?  What  diflference  would  it  make  to  the 
auditor's  action  if  the  facts  as  regards  the  loan  were  not  dis- 
closed on  the  face  of  the  statement?    Give  your  reasons  for  your 

replies. 

♦  ♦       ♦       *       * 

How  would  you  verify  the  correctness,  both  as  to  quantity 
and  value,  of  the  following : 

(a)  Pig  iron  and  mineral  stock  of  a  blast  furnace  company; 

(b)  Raw  cotton  and  yarn  stock  of  a  cotton  spinning  mill ; 

(c)  Coal  stock  of  a  coal  merchant; 

(d)  Copper  bars  in  a  storage  warehouse? 

«         *        *         4>         * 

Give  your  views  on  the  advantage  of  a  continuous  (or  con- 
secutive) audit,  as  compared  with  a  periodical  one. 

*  4(  ♦  ♦  4^ 

(a)  Name  various  wa/s  in  which  Sinking  Funds  and  Sink- 
ing Fund  Reserves  may  appear  on  or  aflFect  the  items  of  a  balance 
sheet,  and 

(b)  Various  ways  of  calculating  sinking  funds. 

(c)  From  a  theoretical  point  of  view,  are  the  contributions 

to  such  a  fund  a  proper  charge  against  profits?    Give  reasons. 

4>        ♦        *        ♦        * 

State  briefly  the  facts  that  would  guide  you  in  arriving  at 
the  proper  rate  of  depreciation  to  provide  upon  the  Plant  Build- 
ings, Machinery  and  Equipment,  and  Office  Furniture  and  Fix- 
tures of  a  manufacturing  business. 

♦  *       ♦       *       * 

Give  three  or  four  methods  by  which  the  required  provisions 
to  be  made  during  the  estimated  life  of  the  various  classes  of 

assets  may  be  provided  for  in  the  books. 

♦  ♦       *       ♦       * 

In  auditing  the  books  of 

1.  A  school  district  of  the  first  class, 

2.  A  gas  company, 

outline  what  your  procedure  would  be? 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  C 


Code :    Idol 

The  National  Rubber  Company  of  Chicago,  is  to  have  an  audit 
of  their  accounts  and  your  firm  is  awarded  the  work.  During 
the  time  that  the  Chicago  accounts  are  being  prepared  you  are 
assigned  to  take  up  the  accounts  of  the  Oshkosk  Plant  and  the 
accounts  of  its  selling  company  located  at  the  same  place.  When 
the  assets  and  liabilities  of  both  companies  at  Oshkosh  were  taken 
over  on  December  31,  1916,  no  reserves  in  respect  of  discounts 
and  freight  allowances  to  trade  were  on  record.  The  selling 
company,  known  in  the  trade  as  The  Michigan  Rubber  Company 
under  instructions  from  Chicago,  was  to  make  a  net  profit  equal 
to  1/20  of  1%  of  its  sales  as  invoiced. 

The  values  established  in  the  inter-company  sales  and  purchases 
are  based  on  the  sales  of  the  selling  company  less  its  expenses 
and  a  net  profit  of  1/20  of  1%  of  sales  invoiced.  The  entire 
output  of  the  National  Rubber  Company  is  sold  by  the  Michigan 
Rubber  Company. 

Your  analysis  of  the  accounts  showed  that  the  Michigan 
Rubber  Company  had  Accounts  Receivable  at  the  close  of  1916 
in  the  amount  of  $5o0,000,  the  discount  to  the  trade  averaging 
4.6%  which  was  also  the  prevailing  rate  at  the  close  of  1917. 
There  was  included  in  the  freight  allowances  of  1917  an  amount 
of  $8,400,  on  sales  eflfected  in  1916  and  the  probable  credits  to 
present  outstandings  in  this  respect  were  estimated  at  $11,500. 
You  are  advised  by  officials  that  this  should  not  disturb  the 
profits  of  the  Michigan  Rubber  Company  ($3,750.00)  although 
the  reserves  created  are  to  be  on  the  balance  sheet  of  that  com- 
pany. 

With  the  following  statements,  prepare  a  combined  balance 
sheet  that  can  be  further  combined  with  the  accounts  made  up  in 
Chicago,  at  the  same  time  prepare  a  combined  profit  and  loss 
account  that  will  substantiate  the  profit  for  each  company  shown 
in  the  combined  balance  sheet,  remembering  that  the  surplus  of 
the  subsidiary  company  is  to  remain  at  $3,750.00  regardless  of 
whatever  adjustments  you  make. 

Trial  balances  after  closing  December  31,  1917: 

NATIONAL  RUBBER  COMPANY 
Oshkosh   Plant 

Advances  on  Construction  Contract $     50,00000    $ 

Accrued  Taxes    '  45.000.00 

Accounts  Payable  750,000.00 

B"'ldmgs   600,000.00 

Capital  Stock,  Michigan  Rubber  Co 5,00000 

Cash  55,000.00 

Depreciation  Reserve  190,000.00 

Land   35,000.00 

Liberty  Loan  Bonds  50'000.00 

Insurance  Prepaid  12,000.00 

Interest   Prepaid   17,500.00 

Machinery  and  Equipment  350.000.00 

Michigan  Rubber  Company I,060io00.00 

Notes  Payable  200,000.00 

National  Rubber  Co.  (Chicago) 223150000 

Raw   Material  1,000,000.00 

Work  in  Progress  198,000.00 

Finished  Goods  1,232,000.00 

Profit  and  Loss  (1917) 1,248,000.00 

$4,664,500.00    $4,664,500.00 
(Continued  on  next  page.) 


• 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  C 

Code  :    Idol —  ( Continued ) 

Profit  and  Loss  Account 

Dr.  Cr. 

Sales  $  $6,750,000.00 

Purchase  Discount  59,000.00 

Travel  2,500.00 

Salaries  6,000.00 

Clerical  8,000.00 

Miscellaneous  7,00a00 

Interest  „ 31,000.00 

Manufacturing  Cost  of  Goods  Sold 5,466,500.00 

State  Income  Tax  40.000.00 

Profit   1,248,000.00 

$6,809,000.00    $6,809,000.00 
THE  MICHIGAN  RUBBER  COMPANY 

OSHKOSH 

Dr.  Cr. 

Accounts  Receivable  $   775,000.00    $ 

Advances  to  Employees  1,000.00 

Accounts  Payable  1,800.00 

Notes  Receivable  290,000.00 

Cash  4,550.00 

National  Rubber  Co.,  Oshkosh 1,060,000.00 

Capital  Stock  5,000.00 

Surplus    3,750.00 

$1,070,550.00    $1,070,550.00 

Profit  and  Loss  Account 

Dr.  Cr. 

Sales  Invoiced $  $7,500,000.00 

Sales  Salaries  40,000.00 

Advertising  40,000.00 

Trade  Discount  380,000.00 

Freight  Allowances  1 12,500.00 

Purchases  6,750,J00.00 

Credits  for  Defective  Tires 510,000.00 

Charges  for  Mileage  Used  on  Defective  Tires....  300,000.00 

Recovered  from  Factory  on  Guarantee 60,000.00 

Clerical    22,800.00 

Ttrlephone  and  Telegraph  950.00 

Profit  3,750.00 

$7,860,000.00    $7,860,000.00 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  C 


Code  :    Ignite 

A  close  corporation,  incorporated  under  the  laws  of  the  State 
of  Illinois,  known  as  Company  **A,"  purchases  the  entire  out- 
standing capital  stock  .of  $35,000.00  of  Company  "B"  in  the  year 
1905  for  the  sum  of  $52,500.00.  A  statement  of  assets  and  liabili- 
ties as  on  January  1,  1906,  of  each  company  is  given  below : 

COMPANY "A" 


Assets 

Plant,  machinery,  etc $  457,500 

Merchandise    400,000 

Investment  in  Company  "B's" 

capital  stock 52,500 

Due  by  Company  **B"  on  cur- 
rent account   220,000 

Accounts    receivable    400,000 

Cash    45,000 


Liabilities 

Capital  stock  $1,000,000 

Surplus  500,000 

Accounts  payable  76,000 


$1,575,000 


$1,575,000 


Assets 

Plant,  machinery,  etc $ 

Merchandise    

Unsubscribed  capital  stock 

Accounts    receivable    

Cash    


COMPANY  "B" 


100,000 
95,000 
65,000 
80,000 
15,000 


Liabilities 

Capital  stock  $  100,000 

Surplus  35,000 

Due  to  Company  "A" 220,000 


$    355,000 


$    355,000 


The  directors  of  Company  "A**  realizing  that  it  is  illegal  for 
an  Illinois  corporation  to  own  the  capital  stock  of  another  corpora- 
tion, and  furthermore  desiring  to  eliminate  the  indebtedness  of 
$220,000  due  by  Company  "B"  to  Company  "A"  determine  to  sell 
the  stock  that  they  own  in  Company  "B"  to  their  own  share- 
holders at  150.  Company  "B"  increases  its  capital  stock  from 
$100,000  to  $300,000,  declares  a  stock  dividend  of  100%  and  sells 
2,300  shares  (shares  $100  each)  to  the  stockholders  of  Company 
"A"  at  par.  Company  "A"  declares  and  pays  a  dividend  of 
281/4%  to  its  shareholders.  Company  "B"  then  liquidates  its  in- 
debtedness to  Company  "A." 

Prepare  journal  and  cash  book  entries  that  each  company 
should  make  to  record  the  above  transactions,  with  suitable  ex- 
planations, and  prepare  a  balance  sheet  of  each  corporation  after 
the  completion  of  the  above  transactions. 

In  this  question,  it  is  to  be  assumed  that  the  shareholders  in 
Company  "A"  buy  the  stock  of  Company  "B"  in  the  same  ratio  as 
their  holdings  in  the  stock  of  Company  "A"  bear  to  one  another. 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  C 


Code  :    Ignoble 

Make  out  a  Foreign  Bill  of  Exchange  in  duplicate. 

*  *        *       ♦       ♦ 
Why  is  the  bill  duplicated? 

*  *  *  *  :^ 

What  happens  when  the  "first"  is  presented  to  the  drawee  for 

acceptance,  and  the  "second"  is  accepted? 

*  4>         «         *         « 

In  preparing  a  Profit  and  Loss  Account  foF  a  trading  company 
having  several  departments,  what  main  features  would  you  endeavor 
to  show? 

Give  sample  form  with  probable  names  of  accounts,  but  without 
figures. 

4>  ♦  *  ♦  « 

The  1st  mortgage  10-year  6%  bonds  of  a  street  railway  company, 
now  operating,  sell  at  105  and  the  2nd  mortgage  5-year  6^%  bonds 
sell  at  931^. 

What,  in  your  opinion,  is  the  correct  way  in  wUich  the  premium  and 
the  discount  on  the  said  bonds  should  be  handled? 

In  both  instances  the  money  so  raised  is  to  be  used  for  construction 

worlc. 

*  *        *        *        * 

You  are  asked  to  offer  suggestions  regarding  a  system  of  internal 
check  for  a  company  whose  business  is  that  of  wholesale  merchants. 

Describe  the  office  methods  you  would  introduce  to  safeguard  the 
funds  and  merchandise  of  the  company. 

If  the  cash  in  bank  as  shown  by  the  Cash  Book  or  Ledger  is  recon- 
ciled with  the  amount  shown  by  the  pass  book  or  certificate  obtainea 
from  the  bank,  is  it  necessary  to  check  the  pass  book  with  the  deposits 
as  shown  by  the  cash  book? 

Give  reasons  for  your  answer,  stating  the  nature  of  a  possible 
irregularity  that  might  be  disclosed  by  such  detail  checking. 

«  ♦  4<  *  « 

(a)  What  is  the  difference,  if  any,  between  a  Municipal  Balance 
Sheet  and  the  Balance  Sheet  of  a  Mercantile  Corporation. 

(b)  Name  several  different  kinds  of  bonds  issued  by  a  city  of  the 

first  class  and  state  what  the  funds  raised  from  the  sale  of  said  bonds 

are  used  for 

***** 

(a)  The  Directors  of  a  Mining  Corporation,  of  which  you  are 
Auditor,  decline  to  provide  what  you  consider  an  adequate  depreciation 
of  wasting  assets.  What  attitude  would  you  assume  in  these  circum- 
stances? 

(b)  Discuss  generally  the  duty  of  an  Auditor  in  relation  to  the 
question  of  depreciation  and  illustrate  your  argument  by  dealing  with 
such  items  as: 

Lands  and  Buildings, 

Lease  of  Coal  Mines, 

Goodwill, 

Outside  investments  of  fluctuating  value. 

***** 

Do  you  consider  it  necessary,  and  if  so,  why,  for  an  Auditor  of  a 
corporation  to  peruse  the  Minutes  of  Directors'  and  Shareholders' 
Meetings? 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  C 


Code  :    Ignorance 

Outline  the  principles  of  a  system  to  take  care  of  the 
"C.  O.  D."  and  "Will  Call"  business  of  a  large  retail  general 

store. 

*  *       *       *        * 

What  is  a  clearing  house?    Explain  the  principles  under 

which  the  clearing  house  of  a  city  such  as  Seattle  operates. 

*  *       *       *       * 

Explain  the  difference  between  a  Trading  Account  and 
a  Profit  and  Loss  Account,  and  state  in  which  account  you 
would  place  the  following  items,  giving  your  reasons: 


Purchases 

Freight  and  Cartage 

Bond  Interest 

Depreciation 

Allowances 

Biid  Debts 

Wages 

Commission 

Manrgement  Salaries 


Advertising 

Sales 

Merchandise  on  Hand 

Returns 

Discounts 

Fuel 

Packages 

Directors'  Fees 

Repairs 


*  *        m        *        * 

In  auditing  the  accounts  of  a  trading  company  you  find 
that  an  account  is  kept  in  a  General  Ledger  for  the  Purchase 
Ledger  and  also  for  the  Sales  Ledgers.  Both  of  these  accounts 
are  in  agreement  with  the  total  balances  as  abstracted  in  de- 
tail from  the  Purchase  and  Sales  Ledgers,  respectively. 

You  are  not  required  to  check  the  postings  of  the  in- 
dividual entries  in  the  subsidiary  ledgers,  but,  apart  from  this, 
you  are  asked  to  take  such  action  as  shall  in  your  opinion  be 
a  check  against  possible  fraud.    Describe  the  work  which  you 

think  should  be  done. 

«        ♦        «        «        ♦ 

To  what  special  points  would  you  direct  your  attention  if 

called  upon  to  audit  the  accounts  of  a  company  which  had 

been  in  business  for  a  number  of  years,  if  you  found  that  the 

books  had  not  previously  been  audited? 

*  ♦        ♦        *        * 

Which,  in  your  opinion,  is  the  more  scientific  and  safer 
basis  for  a  company  doing  a  large  retail  business  to  figure  its 
percentage  of  expense  cost,  upon  the  total  amount  of  sales 
or  upon  the  cost  of  goods  sold?  * 

Give  reasons  for  your  answer. 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  C  . 

Code  :    Ignore 

On  January  1,  1910  "XYZ"  Company  acquired  the  entire 

capital  stock  of  the  "PQ"  Company,  consisting  of  1,000  shares  of 

a  par  value  of  $100.00  each,  for  which  was  paid  the  sum  of 

$150,000.00.    After  the  transaction  was  recorded  on  the  books  of 

the  "XYZ"  Company,  the  Balance  Sheets  of  the  two  companies 

were  as  follows : 

"XYZ"  Company  "PQ"  Company 

Real   Estate  $  50,000.00    $  $  25,000.00    $ 

Building,  Plant  and  Equip- 
ment      75,000.00  45,000.00 

Goodwill  25,000.00 

Investment  in  "PQ"  Co 150,000.00 

Inventories  80,000.00  20,000.00 

Accounts  Receivable  70,000.00*  85,000.00 

Accounts  Payable ^ 50,000.00  50,000.00 

Loans  50,000.00 

Capital  Stock 250,000.00  100,000.00 

Surplus 100,000.00  25,000.00 

$450,000.00    $450,000.00    $175,000.00    $175,000.00 

-    '■  ■  ■       ■  '    ' '  I  ■    II  mi  ^^E=3=3=s= 

*  Includes  Account  of  $15,000.00  due  by  "PQ"  Co.  to  "XYZ"  Co. 
Prepare  a  Consolidated  Balance  Sheet. 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  C 


Code:    Image 

Describe:     (a)     Personal  property, 
(b)     Real  property. 

*  ♦  *  ♦  * 
What  is  a  Bill  of  La  ding? 

***** 
What  is  meant  by  a  Bill  of  Exchange  with  Documents  attached? 

***** 

(a)  What  is  the  difieerence  between  a  Quit  Claim  Deed  and  a 
Warranty  Deed? 

(b)  In  any  sale  or  transfer  made  under  the  Bulk  Law  what  is  the 
specific  duty  set  out  in  the  law  devolving  upon  a  purchaser  before 
paying  any  part  of  the  purchase  price  and  before  giving  any  security 
for  payment  thereof? 

***** 

(a)  How  and  when  may  a  seller  or  consignor  stop  goods  in 
transit? 

(b)  When  goods  are  so  stopped,  to  whom  do  they  belong? 

***** 

(a)  Define  agency? 

(b)  Name  two  different  kinds  of  agencies? 

(c)  What  authority  has  an  agent? 

(d)  What  is  the  meaning  of  the  term  "Ultra  Vires?" 

***** 
In   applying  for  a  Receiver  what  rights,  if  any,  has  a  secured 
creditor  over  an  unsecured  creditor? 

***** 

(a)  How  are  the  revenues  of  the  state,  counties,  cities  and  schools 
raised,  by  whom  collected  and  how  disbursed? 

(b)  How  are  the  valuations  of  different  classes  of  property  fixea 
for  the  purpose  of  taxation? 

***** 

(a)  What  is  a  corporation? 

(b)  What  is  a  partnership? 

(c)  What  advantages  or  disadvantages  are  there  between  a  coi 
poration  and  a  partnership? 

***** 

(a)  What  is  necessary  to  form  a  corporation? 

(b)  To  increase  the  capital? 

(c)  To  disincorporate? 

***** 
Is  there  an  inheritance  tax  required  m  this  state? 

***** 
Define:     (a)     Administrator 
(b)     Guardian. 


(c) 
(d) 
(e) 


Executor. 
Receiver. 
Trustee. 


***** 

(a)  Draw  a  negotiable  Promissory  Note. 

(b)  Draw  a  non-negotiable  Promissory  Note.  * 

(c)  When  is  either  of  the  notes  outlawed? 

(d)  In  what  way  can  the  time  of  legal  existence  be  extended? 

***** 

(a)  What  is  the  legal  rate  of  interest  in  this  state? 

(b)  Can  a  higher  rate  be  exacted  or  enforced? 

(c)  If  a  note  is  executed  in  this  state  and  payable  in  another, 
which  would  govern  if  the  rate  of  interest  was  not  alike  in  both? 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  C 


Code:    Impartial 

Describe  the  methods  to  be  adopted  in  preparing  monthly  or 
quarterly  balance  sheets  for  a  company  engaged  upon  large  con- 
struction contracts,  running  over  several  months,  where  it  is  the 
custom  for  the  company  to  receive  advances  from  its  customers 
based  upon  the  percentage  of  work  completed  from  time  to  time, 
in  so  far  as  a  proper  statement  in  the  balance  sheet  of  the  value 
of  work  in  progress,  giving  consideration  to  the  question  of  over- 
head expenses,  and  advances  by  customers  may  be  concerned.  In 
this  connection,  further,  indicate  whether  or  not  you  think  it  con- 
servative practice  to  take  up  any  profit  on  contracts  not  completed, 
and,  assuming  that  a  profit  might,  under  certain  conditions,  be 
taken  up  before  completion  of  a  contract,  how  such  a  situation 

would  be  given  eflfect  on  the  face  of  the  balance  sheet. 

***** 

A  company  having  an  issue  of  $1,000,000.00  of  bonds  running 
for  the  period  of  30  years  and  bearing  interest  at  the  rate  of  6% 
per  annum,  payable  annually,  has  asked  your  advice  as  to  an 
equitable  method  of  disposing  in  its  accounts  of  a  discount  of 
$50,000.00,  paid  to  its  brokers  for  the  negotiation  of  the  bonds. 
You  have  ascertained  that  the  bonds  are  payable  in  annual  instal- 
ments of  $25,000.00  during  the  first  20  years  and  in  instalments 
of  $50,000.00  |>er  annum  during  the  next  five  years,  the  final  pay- 
ment of  $250,000.00  being  due  at  the  end  of  the  thirtieth  year. 
In  answering  this  question  submit  details  of  the  process  you  adopt 

in  arriving  at  your  conclusions. 

*       *       *       ♦       * 

It  is  now  becoming  quite  common  practice  for  corporations 

to  insure  the  lives  of  their  principal  officers,  so  that  upon  their 

deaths  the  corporations  may  be,  in  a  measure,  reimbursed  for 

their  loss  to  the  business.     In  this  connection  you  are  asked  to 

indicate  what  sort  of  entries  would  be  made  by  a  company,  from 

time  to  time,  if  it  paid  the  insurance  premiums  on  a  policy  of 

insurance  for  $50,000.00  carried  on  the  life  of  its  president  under 

the  four  classes  of  insurance  policies  indicated  below : 

10  Year  Renewable  Term  Policy; 
20  Payment  Life  Policy; 
Straight  Life  Policy; 
20  Year  Endowment  Policy. 

Also  indicate  what  entries  should  be  made  in  the  books  for 
the  receipt  of  the  $50,000.00  principal,  of  the  different  classes  of 
policies,  supposing  the  president  of  the  company  died  during, 
say,  the  fifth  year  of  the  insured  term. 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  C 


Code:    Impede 

A  railroad  company  was  liable  in  dam- 
ages to  Henry  Johnson  and  his  wife  by 
reason  of  an  accident  to  the  train  upon 
which  they  were  passengers.  There  was 
no  question  of  the  liability,  but  in  part 
consideration  of  the  liability  and  in  set- 
tlement of  the  claim  the  railroad  com- 
pany made  a  contract  with  them  under 
which  they  agreed  to  issue  them  annually, 
during  their  lives,  a  pass  over  the  road. 
The  accident  occurred  and  the  contract 
was  made  prior  to  the  passage  of  the  In- 
terstate Commerce  Law.  That  law  pro- 
hibits the  issuing  of  passes,  except  to  cer- 
tain specified  persons,  in  none  of  the 
classes  of  which  were  Henry  Johnson 
and  his  wife  included.  After  the  pas- 
sage of  the  law,  the  railroad  company 
refused  to  issue  passes  and  were  sued  for 
their  value.  Does  the  Act  impair  the  ob- 
ligation of  the  contract  and  can  Johnson 
and  his  wife  recover?    Give  your  reasons 

for  your  answer. 

«        «        *        ♦        «        *        * 

•  George  Williamson  was  duly  elected 
president  of  the  Harrisburg  Electric 
Company.    The  company  was  a  new  one 


and  the  success  of  its  business  or  the 
amount  of  income  it  might  receive  was 
problematical,  and  no  salaries  were  fixed 
by  the  board  of  directors  for  any  of  the 
officers.  The  president,  however,  ren- 
dered faithful  and  efficient  service  to  the 
company  for  a  period  of  two  years,  be- 
ing, duly  re-elected  to  the  office,  and  at 
the  end  of  that  time,  by  reason  of  a 
quarrel  with  the  board  of  directors,  he 
resigned.  The  company  was  by  that  time 
in  successful  operation  and  earning 
money,  and  the  president  made  claim  for 
salary  for  compensation  for  the  two 
years'  service  he  had  rendered,  and,  the 
company  declining  to  pay,   he   brought 

suit.     Can  he  recover  or  not? 

*        *        *        *        }f         *         « 

State  some  of  the  provisions  of  the  new 
Federal  Income  Tax  Law  as  to  individ- 
uals. What  persons  are  subject  to  the 
tax,  on  what  do  they  pay  and  what  is  the 
tax?  In  what  cases  are  returns  not  re- 
quired? What  exemptions  are  allowed? 
What  is  the  meaning  of  collection  at 
source  of  this  tax? 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  C 

Code:    Imperative 

Under  a  partnership  agreement  to  be  entered  into  between 
Messrs.  Black,  White  &  Jones,  it  is  to  be  stimpulated  that  the 
books  of  the  firm  are  to  be  audited  annually  by  a  Certified  Public 
Accountant.  You  are  asked  by  the  attorneys  for  the  new  firm 
to  indicate  what  essential  clauses  you,  as  the  prospective  auditor, 
would  like  to  see  embodied  in  the  partnership  agreement  in  order 
that,  so  far  as  possible,  there  may  be  no  disagreement  among  the 
partners  regarding  the  partnership  accounts,  and  that  the  auditor 
may  have  no  misunderstanding  as  to  the  intentions  of  the  partners 

regarding  the  division  of  profits  or  losses. 

***** 

In  a  certain  social  club  there  are  three  classes  of  membership 
with  entrance  fees  of  the  following  amounts : 

Active    Member,   with    privilege    of   transfer   upon    resignation    or 

death  $    150.00 

Life  Member,  \\ith  no  privilege  cf  transfer  bnt  not  liable  for  an- 
nual dues 500.00 

Non-Resident  Member     50.00 

How  should  such  entrance  fees,  when  received,  be  properly 

credited  in  the  books  of  the  club? 

***** 

The  "A."  "B."  Trading  Company,  of  which  you  are  the 
auditor,  is  formed  to  sell  certain  special  articles,  and  enters  into 
an  agreement  with  the  "A."  "B."  Manufacturing  Company  to 
make  the  articles  in  question. 

Both  companies  are  successful,  and,  as  a  result  of  the  grow- 
ing business,  the  manufacturing  company  in  three  years'  time  is 
almost  wholly  engaged  in  supplying  the  trading  company ;  where- 
upon it  is  decided  to  amalgamate  the  two  companies,  and  the 
trading  company  takes  over  the  manufacturing  company,  ex- 
changing share  for  share  as  on  December  31,  1909,  at  which  date 
the  stocks  of  both  companies  were  taken  on  the  basis  of  cost 
price  to  each  company.  On  what  basis  should  the  stocks  at  the 
works  and  the  show  rooms  of  the  amalgamated  company  be  taken 
on  December  31,  1910?    Give  the  reasons  for  your  answer,  and 

state  the  effect  on  the  accounts  for  1910. 

***** 

A  manufacturing  firm  has  a  number  of  departments,  and 
articles  sold  by  the  firm  pass  through  several  departments  before 
being  finally  completed.  The  manager  of  each  department  re- 
ceives, as  part  of  his  emoluments,  a  commission  on  the  profits  of 
his  department.  You,  as  auditor  of  the  firm,  are  instructed  to 
certify  the  amount  of  commission  to  which  each  manager  is  en- 
titled, and  also  the  net  profit  of  the  firm  for  the  past  year.  To 
what  special  points  would  you  direct  your  attention? 


* 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  C 


Code:    Inject 

Define  the  following  legal  terms: 

(a)  Beneficiary. 

(b)  Demurrage. 

(c)  Collateral. 

(d)  Escrow. 

(e)  Vendor. 

(f)  Warranty. 

*  *        ♦        ♦       * 

a.  Define  guaranty;  guarantor;  guarantee;  principal. 

b.  In  what  ways  may  a  guarantor  be  discharged  of  the 
obligation? 

c.  A  guarantor  having  paid  the  principal  debt,  what  are 

his  remedies? 

*  *        *        *        * 

a.  Under  the  laws  of  the  State  of  Washington,  what  con- 
tracts must  be  in  writing? 

b.  Whft  is  en  express  contract? 

c.  What  is  an  implied  contract? 

d.  Draw  a  contract  in  which  you  as  contractor  agree  to 
build  a  house  for  another  party,  using  such  terms  as  you  con- 
sider will  make  a  satisfactory  and  valid  agreement. 

e.  What  is  the  effect  of  the  death  of  either  of  the  parties 
on  a  contract  for  the  sale  of  goods;  a  contract  to  paint  a  pic- 
ture, and  a  contract  of  hiring  and  service? 

4e  4c  4e  :«[  ^ 

a.  Define  interest;  compound  interest;  usury. 

b.  What  is  the  legal  rate  in  this  state? 

c.  Can  a  higher  rate  be  enforced?     If  so,  how,  and  to 

what  extent? 

***** 

a.  Name  four  negotiable  instruments  and  give  an  ex- 
planation of  each. 

b.  A  note  payable  to  the  order  of  A.  B.  is  indorsed  "With- 
out recourse,  A.  B."  and  transferred  to  C.  D.  The  maker  is 
insolvent,  and  after  presentation  to  the  maker  and  notice  t(' 
A,  B.,  C.  D.  sues  A.  B.    What  would  be  the  result? 

***** 

a.  What  advantage  has  a  corporation  as  compared  with 
a  partnership? 

b.  Are  there  any  respects  in  which  a  partnership  has 
advantages  not  possessed  by  a  corporation? 

c.  State  some  of  the  powers  a  corporation  has. 

d.  Under  what  circumstances  can  a  receiver  be  asked  for 
a  corporation? 

e.  In  what  way  may  a  corporatic^  be  dissolved? 

***** 

a.  Name  five  classes  of  insurance? 

b.  What  is  premium? 

c.  Can  any  person  or  firm  do  an  insurance  business  In 
this  State?    Under  what  conditions? 

***** 

a.  What  is  a  conditional  sale? 

b.  What  is  a  bill  of  sale? 

c.  What  is  a  non-negotiable  warehouse  receipt? 

d.  What  is  a  warranty  deed,  and  in  what  respect  does  it 
differ  from  a  quit-claim  deed? 

e.  What  are  the  two  kinds  of  wills  recognized  by  the 
State  of  Washington? 

***** 

What  is  the  Workmen's  Compensation  Law,  and  from  the 
standpoint  of  commercial  accounting,  what,  briefly,  are  the 
principles  of  its  application? 


m^T" 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  C 


Code  :    Iron 

Can  a  national  bank  make  a  loan  upon 
the  security  of  a  mortgage  upon  real  es- 
tate of  the  borrower?  Can  a  trust  com- 
pany organized  under  the  laws  of  this 
state  do  so?  Is  there  any  difference  be- 
tween them  and  why  does  it  exist? 

:|c        *        3|(        4c        :|c 

Thomas  Edmunds  was  president  of  the 
Wyoming  Oil  Company.  This  company 
was  largely  indebted  to  various  persons 
and  was  in  fact  insolvent.  The  president 
of  the  company  applied  to  one  of  the 
creditors  for  an  additional  advance,  but 
the  creditor,  on  examining  into  the  af- 
fairs of  the  company  and  seeing  its  con- 
dition, declined  to  make  the  advance  un- 
less the  president  gave  him  a  mortgage 
upon  his  individual  real  estate,  which  ac- 
cordingly was  done  and  the  advance  was 
made.  The  money  was  insufficient,  how- 
ever, to  relieve  the  company,  and  within 
a  month  thereafter  a  petition  in  bank- 
ruptcy was  filed  against  it  and  it  was  at 
once  adjudicated.  Did  this  constitute  a 
preference  and  what  are  the  rights  of  the 
creditor  with  respect  to  proving  his  debt 
against  the  company? 

K         *  *         >|t  ♦ 

To  whom  will  letters  of  administra- 
tion be  issued  by  registrar  in  case  of  in- 
testate, and  what  are  the  rights  of  hus- 

.band  and  wife? 

t    *    *    *    * 

What  is  a  corporation?  What  is  nec- 
essary to  procure  a  charter  in  this  State  ? 
Give  different  kinds  of  charters. 


The  board  of  directors  of  the  Acme 
Machine  Company  consisted  of  five  per- 
sons, of  which,  under  the  by-laws,  three 
were  necessary  to  form  a  quorum.  A 
meeting  was  called  to  be  held  upon  Janu- 
ary 1,  1913.  Two  of  the  members  of  the 
board  were  absent  and  could  not  attend. 
A  third  one  was  ill  and  so  gave  his  proxy 
to  his  son,  who  attended  the  meeting, 
which  was  held.  Was  the  action  taken 
thereat  valid?  Give  your  reasons  for 
vour  answer. 


The  Star  Hosiery  Company,  a  Penn- 
sylvania corporation,  desired  to  purchase 
some  machinery.  The  seller,  a  Pennsyl- 
vania manufacturer,  was  doubtful  as  to 
the  financial  ability  of  the  company,  and 
in  order  to  secure  himself  entered  into 
a  contract,  which  was  duly  executed  by 
both  parties,  whereby  he  sold  the  Hosiery 
Company  some  machines  upon  terms  of 
one-third  cash,  one-third  in  six  months, 
and  the  balance  in  nine  months,  with  a 
condition  duly  set  forth  in  the  contract 
that  the  title  to  the  machines  should  re- 
main in  the  seller  until  they  were  fully 
paid  for.  Before  the  six  months'  pay- 
ment became  due,  a  creditor  of  the 
Hosiery  Company  obtained  judgment,  is- 
sued an  execution  and  levied  upon  the 
machines,  which  were  then  claimed  by 
the  seller  as  his  property.  Who  is  enti- 
tled to  the  machines  and  why? 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  C 

Code :   Jack 

Prepare  Estate  and  Distribution  Accounts  of  Chas.  Car- 
machael  (widower)  deceased,  September  30,  1912,  who  left  the 
following  property : 

Life   insurance   . „ ^ $  33,750.00 

Household  effects,  appraised 2,500.00 

Real  estate,  appraised 37,500.00 

Bank  account  7,500.00 

Investment  securities  (market  Sept.  30,  1912) 60,000.00        $141,250.00 

Current  debts  at  time  of  death,  $3,000.00.  Funeral  expenses, 
$475.00.    Law  expense  and  inheritance  tax,  $9,000.00. 

The  securities  realized  $65,000.00  and  the  house  effects  netted 
$3,750.00. 

The  special  bequests  (tax  free)  were  $3,750.00. 

The  eldest  son,  John,  elected  to  accept  the  option  his  father 
had  granted  him  of  taking  the  real  estate  at  $40,000.00. 

The  residue  was  to  be  divided  equally  among  the  three  sons, 
John,  James  and  William,  who  were  required  to  bring  into  hotch- 
pot or  collation,  money  advanced  to  them  five  years  back,  to- wit, 
$17,500.00,  $21,250.00,  and  $10,000.00,  respectively. 


» 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  C 


Code  :    Jacket 

You  are  called  in  on  June  1,  1915,  to  assist  the  executor  of  the 
estate  of  John  Brown,  deceased,  in  preparing  his  accounts  in 
connection  with  the  trust.  You  find  that  no  books  have  been 
kept,  the  papers  given  you  from  which  to  work  consisting  of  a 
certified  copy  of  the  inventory  of  the  estate  filed  by  the  executor 
with  the  Probate  Court,  and  check  stubs  and  cancelled  checks 
evidencing  his  receipts  and  disbursements  of  the  estate  funds. 

You  find  that  John  Brown  died  on  December  27,  1914,  and  that 
among  the  receipts  by  the  executor  are  the  following: 

RECEIPTS 

Cash  in  Bank  paid  Executor -. $  1,500.00 

Dividend  on  mining  stocks  declared  Dec.  27,  1914 1,000.00 

Interest  on  note  dated  Oct.  27,  1914,  for  $10,000. 150.00 

Salary  John  Brown  for  Dec.  1914 250.00 

Sale  N.  P.  Co.  Bonds  Inventoried  at  $5,000.00 6,500.00 

Accrued  interest  thereon  from  Aug.  1st,  1914  @  5%....  125.00 
Dividends    in    Manufacturing    Corporation    declared 

Jan.   12,  1915,  Cash  Dividend i'SSSSS 

Stock  Dividend - -- 2.000.00 

Feb.  10    Royalty  on  account  of  Brown's  interest  in  Iron  Mine, 

payable  quarterly  —  }'^'99 

Sale  of  rights  for  subscription  to  additional  Bank  Stock  1,000.00 
Refund  a/c  Fire  Insurance  Premium  on  policy  dated 

June  1,  1914  - ^^"^ 

Interest  for  one  year  on  Farm  Mortgage  of  $3,000.00....  }^^ 

Apr.  15    Sale  of  Brood  Mare -  200.00 

and  three  months  old  colt -•  ^^ 

May  15     Profits  for  fiscal  year  ending  April  30,  1915,  in  firm  of 

Smith  &  Brown  as  per  co-partnership  agreement 3,000.00 

From  the  foregoing  show  how  these  receipts  should  be  shown 
in  the  executor's  accounts. 


Jan. 
Jan. 
Jan. 

25 
25 
27 

Feb. 

1 

Feb. 

1 

Mch.    1 
Mch.  15 

Apr.    1 


» 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  C 


Code :   Jaconet 

"A"  purchases  of  "B"  a  lot  and  gives  his 
negotiable  note  for  $5,000,  part  of  the  purchase 
price.  Before  maturity  of  the  note,  "B"  bor- 
rows of  "X"  National  Bank  $3,000,  and  depos- 
its "A's"  note  as  collateral  security,  without 
"A's"  knowledge.  "A"  pays  to  "B"  the  $5,000 
he  owes,  but  "B"  fails  to  repay  the  Bank  the 
$3,000  when  due,  "B"  having  become  insolvent. 
What  is  "B's"  liability  to  the  bank  ? 

*****  *  ♦ 

"A"  tells  "B"  that  he  wishes  to  give  him 
$5,000,  and  hands  him  his  negotiable  note  for 
the  amount,  payable  six  months  after  date. 
"A"  fails  to  pay  the  note  when  due.  State 
whether  or  not  "B"  can  recover  the  amount. 
If  "B"  had  endorsed  it  and  had  it  discounted 
before  maturity  at  the  "X"  National  Bank, 
could  the  bank  have  recovered  the  amount  of 
•'A."  r.fter  non-payment  at  maturity?  Give 
reason. 

*****  *  * 

"A,"  a  merchant,  gives  "B"  a  deed  of  trust 
on  his  fixtures  to  secure  a  debt  of  $5,000,  on 
January  1,  1911.  On  July  1,  1911,  "A"  makes 
an  assignment  of  his  stock  of  goods  and  fix- 
tures to  "C,"  trustee,  for  the  benefit  of  his  cred- 
itors. "A's"  liabilities  aggregate  $20,000,  exclu- 
sive of  "B's"  debt,  while  his  stock  inventories 
$10,000  and  his  fixtures  $3,000.     "C"  sells  the 


stock  and  fixtures  at  60  per  cent  of  inventory ; 
and,  after  paying  all  costs  and  expenses,  the 
sum  of  $7,000  is  left  for  distribution.  What 
amount  is  payable  to  "B"  and  what  to  the  other 
(Creditors  ? 


"A"  is  a  dealer  in  wheat,  of  which  he  has 
several  grades.  "B"  calls  and  inspects  his 
stock,  and,  deciding  to  buy  all  of  the  X  grade 
at  a  designated  price,  ^ays  "A"  $5,000,  the  price 
ascertained  by  measuring,  but  says  he  will 
move  it  the  next  day.  **C"  calls  and  leaves  an 
order  for  1,000  bushels  of  Y  grade  wheat  at 
$1.00,  to  be  delivered  in  ten  days,  and  deposits 
$500  on  his  contract.  "A"  has  3,000  bushels  of 
that  grade  in  bulk.  That  afternoon  "D,"  a 
creditor  to  whom  "A"  owes  $10,000,  levies  an 
execution  on  all  the  wheat  in  "A's"  possession, 
which  inventories  only  $9,000.  What  are  the 
rights  of  "B,"  "C"  and  "D,"  respectively? 
*         *         *         *         ♦  *  ♦ 

The  firm  of  "A"  &  Company  (composed  of 
"A"  and  "B")  is  engaged  in  the  lumber  busi- 
ness. Without  "B's"  knowledge  "A"  buys, 
through  a  broker,  American  Tobacco  Stock, 
signing  the  firm's  name  to  the  contract.  The 
stock  declines  and  is  sold  at  a  loss.  To  what 
extent,  if  any,  is  the  firm  liable  for  that  loss, 
and  to  what  extent,  if  any,  is  "B"  liable? 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  C 


Code :    Jade 

The  administrator  of  a  will  received  $63,000  in  cash  to  be 
distributed  among  the  heirs  and  legatees  under  the  terms  of  the 
will,  as  follows :  ' 

Sarah,  a  daughter  of  the  deceased,  after  payment  of  the 
legacies,  including  a  legacy  of  $1,000.00  to  herself,  was  to  receive 
one-fifth  of  the  residue  of  the  estate. 

Jane,  a  daughter  of  the  deceased,  after  payment  of  the  lega- 
cies, was  to  receive  one-fifth  of  the  residue  of  the  estate. 

Anne,  a  daughter  of  the  deceased,  was  to  receive  the  same  as 
Jane. 

•  George,  a  son,  after  payment  of  the  legacies,  including  a 
legacy  of  $500.00  for  himself,  was  to  receive  one-fifth  of  the 
residue  of  the  estate. 

Three  children  of  a  deceased  son,  Jacob,  were  to  receive  lega- 
cies of  $500.00  each. 

Reuben,  a  son,  was  to  receive  one-fifth  interest  in  the  residue 
of  the  estate,  subject  to  the  payment  of  the  legacies  as  mentioned 
and  also  subject  to  legacies  of  $3,000.00  each  to  his  wife  and  each 
of  his  three  children. 

The  administrator  carried  out  the  terms  of  the  will. 

Open  the  books  of  the  administrator,  showing  the  receipt  of 
the  funds,  their  proper  distribution  and  payment,  also  give  closing 
entries. 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  C 


Code  :   Jail 

(a)  Name  the  principal  debit  and  credit  accounts — ^both  cor- 

pus and  income — that  an  executor  should  keep,  and 
briefly  describe  their  purpose. 

(b)  Under  what  heading,  corpus  or  income,  would  you,  as  a 

general  rule,  place  the  following: 

1.  Funeral  expenses. 

2.  Executor's  expenses. 

3.  Profit  and  loss  on  sale  of  investments. 

4.  Cash  dividend  on  investment  of  executor. 

5.  Cash  dividend  on  investment  of  testator. 

6.  Cash  legacies. 

7.  Property  legacies. 

8.  Quarterly  allowance  to  widow. 


« 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  C 


Code :   Jair 

You  are  required  to  write  up  the  accounts  of  the  executor 
of  an  estate  and  show  the  amounts  which  would  appear  in  the 
capital  and  income  accounts  as  at  March  31,  1910.  The  testator 
having  died  November  30,  1909,  leaving  a  widow  who  is  to  receive 
two-thirds  of  the  income,  and  one  child  who  is  to  receive  one- 
third.    The  property  consisted  of: 

$40,000  loaned  on  mortgage  at  5  per  cent.  Interest  payable  semi-annually 
on  June  30th  and  December  31st. 

$10,000  first  mortgaged  5  per  cent,  bonds  of  a  railway  company.  Interest 
.semi-annual  on  March  1st  and  Sept.  1st. 

$10,000  5  per  cent,  cumulative  preferred  stock  of  an  industrial  company: — 
full  dividends  on  which  were  declared  and  paid  quarterly  in  each 
year  up  to  Dec.  31,  1907.  4  per  cent,  was  paid  in  1908;  1  per  cent, 
each  quarter  in  1909,  and  on  March  31st,  1910,  the  executor  re- 
ceived 2  per  cent,  in  respect  of  dividends  in  arrears,  and  1%  per 
cent,  for  first  quarter  of  1910. 

$20,000  common  stock  of  industrial  company,  which  paid  2  per  cent,  cash 
dividend  on  March  1,  1909;  2  per  cent.  June  1,  1909;  2  per  cent 
September  1,  1909;  2  per  cent,  cash  and  a  stock  bonus  of  10  per 
cent  on  Dec.  1,  1909,  and  2  per  cent.  March  1,  1910. 

$  5,000  in  household  furniture  and  effects — devised  to  widow. 

$     175  cash  in  house — devised  to  widow. 

$  4,250  cash  in  bank,  of  which  the  residue,  after  discharging  $1,250  of 
debts  due  sundry  creditors  and  $250  for  funeral  expenses  is  de- 
vised to  the  widow. 

Assume  all  sums  receivable  to  have  been  collected,  and  that 

the  debts  and  funeral  expenses  have  been  paid.     Also  that  the 

cash  residue  and  household  effects  have  been  transferred  to  the 

widow. 

Ignore  odd  days  in  making  apportionment  and  consider 
months  as  l-12th  of  the  year. 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  C 

Code  :   Jam 

Upon  the  death  of  a  retired  business  man,  a  will  is  found 
conveying  real  and  personal  property  aggregating  $300,000.00  to 
the  widow  for  her  life,  and  upon  her  death  distributable  equally 
among  five  children,  per  stirpes.  Among  the  decedent's  papers, 
is  found  a  bond  and  mortgage  on  a  piece  of  real  estate  owned  by 
a  previous  deceased  wife,  and  sold  by  the  decedent  as  special 
guardian  of  her  two  children,  Henry  and  Emma,  both  of  age  at 
father's  death,  who  had  never  heard  of  their  mother's  estate,  nor 
had  any  accounting  of  it.  The  bond  and  mortgage,  amounting 
to  $10,000.00,  was  taken  in  part  payment  for  such  real  estate,  the 
whole  price  realized  having  been  $20,000.00.  The  decedent  died 
in  June,  1900,  and  the  deceased's  wife's  real  estate  was  sold  in 
June,  1890.  The  bond  carried  6  per  cent,  interest,  payable  semi- 
annually on  the  1st  day  of  June  and  the  1st  of  December,  and  all 
such  payments  on  the  bond  had  been  made. 

Prepare  a  statement  showing  what  would  accrue  to  each  of 
five  children  then  living  at  the  death  of  the  widow  including  the 
amounts  to  which  Henry  and  Emma  would  be  entitled  on  account 
of  their  mother's  estate. 


b(t' 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  C 


Code:   Jamb 

1  A  sends  to  B,  in  settlement  of  an  undisputed 
account  amounting  to  $1,000,  a  check  for  $850,  bear- 
ing the  inscription  "In  full  payment  of  account." 
B  deposits  the  check  in  his  bank  for  collection  but 
credits  A's  account  only  with  $650.  Is  A  liable 
for  the  balance?     If  so,  why?     If  not,  why  not? 

2  A  received  from  B  an  order  in  writing  to  ship 
a  barrel  of  paint  "via  New  York  Central"  to  Roch- 
ester. When  the  barrel  reached  destination  it  was 
empty.  Can  A  recover  from  the  railroad  for  the 
value  of  the  paint?     Explain. 

3  A  stores  goods  with  B,  a  warehouseman.  The 
goods  are  stolen  from  the  warehouse  without  negli- 
gence on  the  part  of  B.  Is  B  liable  for  the  goods? 
If  so,  why?     If  not,  why  not? 

4  A  makes  a  promissory  note  in  favor  of  B  for 
$100,  payable  in  one  year  after  date  at  4%.  The 
note  is  dishonored  at  maturity  and  nothing  is  paid 
on  it  for  two  years.     How  much  is  due? 

5  A  guaranteed  the  performance  of  a  contract  by 
B.  The  contract  was,  however,  performed  by  B  & 
Co.,  a  firm  of  which  B  was  a  member.  On  the 
breach  of  the  contract  the  creditor  brought  action 
against  A  on  the  guaranty.     Is  A  liable?     Explain. 

6  A  steamboat  owned  by  a  corporation  and  not 
insured  by  it,  is  insured  by  D,  a  stockholder,  in  a 
reputable  company.  Subsequently  the  steamboat  is 
destroyed  by  fire.  The  insurance  company  refuses  to 
pay  D,  claiming  that  he,  D,  has  no  insurable  inter- 
est.    Is  D's  claim  collectible?     Elxplain. 

7  A  owns  several  coal  yards;  he  puts  B  in  charge 
of  one  of  them  with  instructions  to  hire  only  a  certain 
number  of  men.  B  hires  more  than  this  number 
of  men.     Is  A  liable  for  their  wages?     Explain. 

8  With  what  provision  of  the  law  must  one  com- 
ply in  order  to  conduct  a  general  mercantile  or  manu- 


facturing business  in  this  state  in  a  fixed  location  as 
agent  for  another? 

9  A  invested  $5,000,  B  $1,000  and  C  his  skill  in 
a  partnership.  After  settlenkent  is  made  with  credit- 
ors it  is  found  that  the  firm  has  lost  $1,000  and  in 
addition  A  has  loaned  the  firm  $1,000.  How  would 
you  close  up  the  partnership?  What  amounts  are 
due  the  partners  respectively? 

10  When  may  a  special  partner  lawfully  receive 
interest  on   the  capital  contributed  by  him? 

1 1  Among  the  assets  of  a  corporation  are  several 
notes  from  subscribers  in  payment  of  an  instalment  of 
capital  stock  after  it  has  been  called  in  and  pa3rment 
required.  What  liabilities  does  this  impose  on  the 
directors  ? 

12  A  is  the  bona  fide  holder  of  a  note  for  $1,000, 
payable  three  months  after  date  and  made  by  the 
N  Company,  a  domestic  corporation.  The  note  is 
executed  by  the  proper  officers  of  the  corporation, 
who  are  authorized  to  do  this  by  the  board  of  direc- 
tors, and  is  to  bear  interest  at  the  rate  of  10%.  Is 
the  corporation  liable  on  the  usurious  note?  If  so, 
for  how  much?      If  not,  why  not? 

1 3  A  piece  of  real  property  covered  by  a  mortgage 
is  insufficient  to  satisfy  the  mortgage  debt.  With  re- 
spect to  other  creditors,  what  rank  does  the  mortgagee 
have  for  the  balance  due  him  on  the  personal  property 
of  the  mortgagor? 

14  Give  the  order  of  payment  to  creditors  of  an 

insolvent  corporation. 

15  a  What  claim,  if  any,  have  stockholders  as 
against  other  creditors  on  funds  set  aside 
for  payment  of  a  dividend  declared  pay- 
able. 

b  What  claim,  if  any,  have  they  on  the  general 
assets  of  the  corporation  when  no  specific 
funds  have  been  set  aside? 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  C 


Code  :    Jangle 

A  testator  directed  that  the  income  of  his  estate  should  be 

paid  to  the  widow  during  her  lifetime,  and,  in  the  event  of  her 

death,  the  income  to  be  divided  equally  between  (not  among)  his 

son  and  two  daughters.     The  widow  died  on  August  1,  1908. 

The  income  of  the  estate  for  the  year  1908  was  as  follows : 

1908. 

Jan.     1.     Commonwealth  Electric,  interest $300.00 

Feb.  28.    Mortgage,  interest,  So.  Chicago 48000 

Mar.  31.    Mortgage,  interest,  Evanston  660.00 

April  1,     Rent  of  barn,  year  in  advance ^ 120.00 

May    1.    Bank  dividend -._ ^ 510.00 

June   2.    Santa  Fe,  interest „ 285.00 

July    1.    Commonwealth  Electric,  interest „ 300.00 

Aug.  31.     Mortgage  interest,  So.  Chicago ^ 480.00 

Sept.  30.     Mortgage  interest,  Evanston  „ 66000 

Oct.     1.    C,  B.  &  Q.  R.  R.,  dividend 120.00 

Nov.    1.     Bank  dividend  and  extra  765.00 

Dec.    2.     Santa  Fe,  interest  285.00 

Advances  to  widow  during  the  year— Jan.  31,  $250.00;  Mar.  28,  $500.00; 

July  25,  $1,500.00. 

Apportion  the  income  by  months,  using  the  columnar  form 
of  statement  for  the  purpose,  and  write  up  the  following  accounts ; 
considering  the  dates  of  payments  to  and  from  as  the  due  dates : 
Cash  Account;  Widow's  Account;  Son's  Account; 
Each  Daughter's  Account. 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  C 


Code:   Janitor 

The  estate  of  John  Robertson,  deceased,  consisted  of  the  fol- 
lowing assets,  which  were  appraised  as  required  by  the  Probate 
Court : 

Appraised 

Value  Disposition  under  the  Will 

Flat  Building $17,000.00  To  his  daughter  Mary. 

6%   Mortgage  —  interest  To  the  widow  for  life,  and  then 

payable  June  1  and  De-  to  his  two  sons,  John  and  James, 

cember  1  35,000.00  equally. 

Vacant  Real  Estate — 

Lot  1  10,000.00  Cash  to  John,  James,  and  Mary, 

Lot  2  8,000.00  $5,000.00  each,  and  the  balance  of 

Home  9,000.00  the  estate  to  the  widow. 

Household  effects 1,500.00 

Cash 2,500.00 

At  the  time  of  death  (June  24,  1915)  the  accrued  interest 
amounted  to  $140.00. 

Debts  amounting  to  $400.00,  funeral  expenses  of  $450.00, 
and  the  legal  probate  expenses  amounting  to  $900.00  were  paid 
in  cash.  In  September,  1915,  Lot  1  was  sold  for  $12,000.00,  and 
by  the  consent  of  all  parties  John  took  Lot  2  and  paid  the  estate 
$3,500.00  in  cash  in  discharge  of  the  bequest  to  him. 

The  widow  died  on  May  15,  1916,  at  which  date  the  accrued 
interest  amounted  to  $962.50.  The  widow  left  her  entire  estate 
to  Mary. 

The  interest  on  the  mortgage  was  promptly  collected  on 
December  1,  1915  and  June  1,  1916. 

Prepare  the  statements  necessary  for  presentation  to  the 
court  in  closing  the  estate  as  at  July  15,  1916. 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  C 


Code  :    January 

A  testator  bequeathed  by  his  will  legacies  amounting  to 
$6,700.00.  His  widow  was  to  be  paid  $1,000.00  within  one  month 
after  his  death,  and  his  household  furniture  was  specifically  be- 
queathed to  her.  $74.12  was  found  in  the  house  and  the  cash  at 
the  bankers  was  $1,842.91.  His  investments  were  valued  at  $48,- 
461.12  (their  nominal  value  being  $45,000.00).  His  real  property 
was  valued  at  $68,000.00.  Persons  were  indebted  to  him  for 
loans  without  interest  for  $450.00,  while  his  creditors  were 
$7,276.54.  The  funeral  expenses  came  to  $98.16,  probate  and 
miscellaneous  expenses  to  $4,697.45. 

Draw  a  statement,  showing  the  net  worth  of  the  estate, 
assuming  that  the  investments  were  bonds  bearing  interest  at  4 
per  cent.,  that  the  real  propery  yielded  6  per  cent.,  that  the  former 
were  paid  off  half-yearly,  and  the  latter  quarterly,  and  that  both 
interests  and  rents  fell  due  two  months  after  the  testator's  death. 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  C 


Code  :   Japan 

Thomas  Higgins  died  in  1895  leaving  his  entire  estate  in 
trust  for  the  benefit  of  his  widow,  and  upon  her  death  to  be  given 
to  his  children ;  the  trustees,  upon  discovering  a  large  contingent 
liability  which  might  eventually  fall  upon  the  estate,  refrained 
from  paying  out  any  income.  The  widow  dies,  thereby  releasing 
the  liability ;  therefore,  the  estate  is  to  be  divided  into  three  equal 
parts. 

Prepare  a  trial  balance  and  statement  showing  the  value  of 
the  estate,  from  the  following,  and  without  displaying  ledger 
accounts  or  journal  entries: 

Income $  1,025.00 

Accounts  due  T.  H 12,046.00 

Taxes — Inheritance   7,222.00 

Trustee  expense  257.50 

Legacies  557.00 

Mortgages  paid  ^ ^ ^    3,931.00 

Funeral  expenses  511.50 

Accounts  payable  _ 245.00 

Law  expense 388.50 

Investments  by  Trustee  .^ 12,755.00 

Cash  in  bank  270.00 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  C 


Code:   Japanese: 

In  auditing  a  balance  sheet  explain  the  basis  upon  which  you 
would  ascertain  the  proper  valuation  of : 

(a)  Notes  Receivable, 

(b)  Goodwill, 

(c)  Notes  Payable, 

(e)  Accounts  Payable. 

(d)  Reserve  for  Bad  Debts, 

(f)  Notes  Receivable  Discounted, 

(g)  Reserve  for  Depreciation. 

The  trading  profits  of  a  manufacturing  concern  for  a  year 
in  which  the  sales  have  equalled  those  of  several  years  past,  show 
a  considerable  reduction  from  preceding  years.  You  are  asked  to 
investigate  and  report  to  the  firm  the  reasons  for  this  reduction  in 
profits. 

To  what  special  matters  would  you  give  your  attention  and 
how  would  you  proceed  to  investigate  them? 

In  auditing  the  accounts  of  an  educational  or  charitable  in- 
stitution, where  the  president  and  the  secretary  are  authorized  to 
collect  and  receipt  for  subscriptions  and  donations,  what  informa- 
tion and  evidence  would  your  require,  before  certifying  the  ac- 
counts, to  satisfy  yourself  that  subscriptions  and  donations  had 
been  properly  accounted  for,  and  what  methods  and  safeguards 
would  you  suggest  to  ensure  this? 

A  manufacturing  company  has  among  its  investments  a 
mortgage  loan  secured  by  improved  real  estate.  During  the 
course  of  your  audit  for  the  year  1915  you  find  that  it  carried  in 
its  asset,  representing  Accrued  Interest  Receivable  as  at  January 
1,  1915,  the  interest  accrued  on  this  mortgage  during  1913  and 
1914.  No  payment  was  made  on  this  interest  during  1915.  No 
decision  has  been  reached  by  the  company  as  to  whether  or  not 
foreclosure  proceedings  will  be  instituted.  In  preparing  your 
accounts  for  1915,  having  in  mind  the  income  tax  regulations, 
would  you  recommend  that  the  company  accrue  the  interest  in 
its  books  for  the  year  1915?  Give  reasons  for  your  answer. 
Would  your  recommendations  be  changed  in  any  respect  if  this 
investment  were  held  by  an  individual  instead  of  a  corporation? 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  C 


Code :    Jar 

"B"  is  named  as  executor  of  "A,"  deceased. 

"B"  finds  the  following  assets  belonging  to  the  estate : 

50  houses,  each  subject  to  a  mortgage  of  $1,000,  appraised  value 

of,  each  $    2,000.00 

Cash   20,000.00 

1,000  shares  Traction  stock,  market  value $  50.00  each 

500  shares  Electric  stock  '*  "     30.00     " 

10  shares  Railroad  stock         "  "    40.00     " 

5  shares  Gas  stock  "         "    35.00     " 

10,000  Bonds  Electric  Co.  "         "    95% 

50.000  Bonds  Railway  Co.  "         "    105% 

40,000  Bonds  Gas  Co.  "         "    95.50% 

The  appraisement  is  made  on  the  basis  of  market  value. 
In  addition  thereto,  he  finds  the  following  assets  which  are 
appraised  at  the  prices  set  opposite  them: 

Household  furniture  $  1,800.00 

Horses,  wagons  and  harness 1,800.00 

During  the  year  of  his  administration  of  the  estate,  the  follow- 
ing additional  cash  comes  into  his  hands : 

Sale  of  1000  shares  Traction  stock  @ $     48.00  per  share 

Sale  of    500  shares  Electric  stock    @ 37.50 

Sale  of      10  shares  Railroad  stock  @ 42.50       ** 

Sale  of        5  shares  Gas  stock  @ 40.00 

10,000  Bonds  Electric  Co.  @ 92% 

50,000  Bonds  Railway  Co.  @ 108% 

40,000  Bonds  Gas  Co.  @ 95% 

Horse  and  wagons  and  harness 1,650.00 

From  sale  of  rights  to  subscribe  for  new  issue  of  rail- 

roid  stock  1,200.00 

From  rentals  of  houses 8,000.00 

F  om  sale  of  two  houses..... 4,600.00 

The  following  payments  have  been  made  by  him: 

Funeral  expenses  $  250.00 

Debts  of  decedent  _...  2,200.00 

Taxes  on  real  estate  2,035.00 

Water  rents 450.00 

Mortgage  rn  two  houses,  sold 2,000.00 

Interest  on  mortgages ~ 2,500.00 

Repairs  real  estate - 450.00 

Prepare  accounts  in  detail,  also  copies  of  final  accounts  for 
submission  to  the  court. 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  C 

Code :    Jargon 

An  executor  comes  into  possession  of  the  following  assets  of 
a  decedent: 

Cash  „ $2a000.00 

$48,000  Lehigh  Valley  R.  R.  Bonds 48,000.00 

1,000  shares  Penna.  R    R.  Stock 68,000.00 

1,000  shares  U.  G.  I.  Co.  Stock 108,000.00 

509  shares  Philada.  Traction  Stock  48,500.00 

Real  estate,  20  houses  assessed  value  of  each 5,000.00 

Household  furniture  5,000.00 

During  his  administration  he  receives  the  following 
cash: 

Sales  of  all  the  Lehigh  Valley  R.  R.  Bonds.... $  42,747.00 

Sales  of  all  the  Penna.  R.  R.  Stock 64,283.75 

Sales  of  all  the  U.  G.  I.  Co.  Stock ^ 110,175.25 

Sales  of  all  the  Philada.  Traction  Stock 48,125.00 

20  houses  @  $6,000  each 120,000.00 

Income  from  interest  on  bonds  and  dividends  on  stock 8,400.00 

Interest  on  deposits  „ 1,200.00 

Rentals  of  real  estate  „ 7,500.00 

And  his  payments  were  as  follows : 

Funeral  expenses  of  decedent 350.00 

Sundry  indebtedness  of  decedent 7,482.00 

Adjusted  taxes  and  water  rents  of  real  estate 1,437.50 

Legal  expenses  and  court  charges 4,800.00 

He  has  advanced  to  the  widow  of  the  decedent  the  sum  of 8,500.00 

The  widow  is  entitled,  under  the  will,  to  the  entire  income  of 
the  estate ;  the  corpus  of  the  estate  to  be  held  in  trust  by  a  trust 
company  as  trustee. 

State  all  actions  necessary  to  be  taken  by  the  executor  on  com- 
ing into  possession  of  the  estate,  formulating  such  accounts  as 
are  neces.sary,  and  state  final  account  for  filing  in  the  Orphans' 
Court. 


•% 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  C 

Code :   Jasper 

James  Buck  died  March  31,  1908,  leaving  an  estate,  and  in  his 
last  will  made  a  public  accountant  his  executor.  The  will  pro- 
vided the  following: 

Legacies  of  $3,500.00  each  to  the  testator's  two  brothers. 
A  legacy  of  $5,000.00  to  the  testator's  sister. 
A  legacy  of  $2,500.00  to  the  testator's  nephew. 

The  residuary  estate  should  go  to  the  testator's  wife,  two  sons 
and  three  daughters  in  the  following  proportions:  2-5  to  the 
wife,  1-5  to  the  eldest  son,  and  1-10  each  to  the  second  son  and 
daughters  respectively. 

The  estate  consisted  of: 

Cash  on  hand $     246.19 

Cash  at  Safety  Trust  Co 3,556.50 

18  Imp.  Jap.  Gov.  4%%  Gold  Bonds  at  1,000 18,000.00 

30  shares  Chicago  &  Northwestern  R.  R.  Stock  at  155    4,650.00 

25  shares  Penn.  R.  R.  Stock  at  122 3,050.00 

2  demand  notes  at  $500  each 1,000.00 

Stock  in  Business 9,375.00 

The  testator  owed  to  F.  Harbor  $1,500.00. 
The  appraiser  appointed  by  the  court  inventoried  the  estate 
as  follows: 

18  Imp.  Jap.  Gov.  4%%  Gold  Bonds  at  $1,020.00  each. 
30  shares  Chicago  &  Northwestern  at  152  1-9. 
25  shares  Penn.  R.  R.  Stock  at  120. 
2  demand  notes  as  per  inventory. 
Stock  of  goods,  $8,000.00. 

The  executor  collected  from  the  Trust  Company  the  deposit 
of  $3,556.50  and  also  $28.96  in  interest.  He  sold  the  stocks  at 
the  appraised  figures  and  the  bonds  at  1025.  He  paid  to  F. 
Harbor  th:  amount  due  him,  to  B.  Robert,  undertaker,  $786,  for 
funeral  expenses.  He  also  paid  for  sundry  expenses  $286,  ap- 
proved by  the  court.  He  deducted  his  commissions  of  $500.00 
and  distributed  the  funds  according  to  the  last  will. 

From  the  above  statement,  prepare  schedules  for  presentation 
to  the  court  in  final  accounting. 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  C 


Code  :    Jaunt 

John  Smith  dies  on  October  15,  1901,  leaving  a  will  in  which 
he  names  certain  legacies,  which,  in  the  aggregate  amount  to 
$50,000.00.  The  executors  are  then  instructed  (1)  to  use  their 
best  judgment  in  the  disposition  of  such  assets  as  may  be  neces- 
sary to  liquidate  all  his  liabilities;  (2)  to  pay  to  his  widow  Mrs. 
Sarah  Smith  an  allowance  at  the  rate  of  $8,000.00  per  annum 
from  the  date  of  his  death  to  the  date  of  the  distribution  of  the 
residue  of  his  estate;  and  (3)  to  distribute  the  residue  of  the 
estate  after  all  claims  and  legacies  have  been  met,  as  follows :  ^3 
to  his  widow  and  %  to  certain  trustees  named  in  the  will. 

After  his  death,  the  executors  drew  up  an  inventory  of  the 
estate,  which,  upon  being  appraised,  shows  the  following  condi- 
tion : 

ASSETS 

Real  estate  - $589,000.00 

Corporation  stock „ 320,000.00 

Bonds  with  premium  added 460,928.00 

Bills  receivable 3,482.00 

Land  contracts  37,500.00 

Interest  accrued  on  bonds,  bills  receivable  and  land 

contracts   7,890.00 

Accounts  receivable  2,000.00 

Cash  29,00000 

LIABILITIES 

Mortgage  on  improved  city  real  estate $  50,090.00 

Bills  payable  :..  150.000.00 

Accounts  payable  1,980.00 

Funeral  expenses  1,000.00 

Interest  accrued  on  demand  notes 1,200.00 

Six  months  after  the  inventory  had  been  filed  it  develops  that 
John  Smith  had  endorsed  the  note  of  Joseph  Stevens  for  $15,- 
000.00,  and  had  discounted  same  with  his  bankers.  Upon  the 
note  coming  due,  Joseph  Stevens  failed  to  meet  it.  The  bank 
filed  a  claim  against  the  estate  of  John  Smith  for  the  amount, 
which  was  duly  paid  by  the  executors.  It  is,  however,  believed 
that  in  a  course  of  time  this  note  of  Joseph  Stevens  can  be  realized 
upon. 

One  year,  exactly,  after  the  death  of  John  Smith,  the  execu- 
tors distribute  the  residue  of  the  estate,  and  close  the  books. 

The  following  transactions,  in  addition  to  those  enumerated 
or  suggested  above,  have  taken  place  during  the  year. 

75  Bonds  Par  $1,000.00  and  inventoried  at  110  were  sold 
at  103%. 
300  Shares  Par  $100.00  and  inventoried  at  85  were  sold  at  90. 

400  Shares  Par  $100.00  and  inventoried  at  90  were  sold  at  an 
increase  of  10  per  cent,  of  their  inventory  valuation. 

Real  Estate  which  was  encumbered  by  the  mortgage  of  $50,- 
000.00  was  sold  by  consent  of  the  Probate  Court  and  of 
the  widow  for  a  sum  of  $35,000.00  in  excess  of  the  mort- 
gage, the  purchaser  assuming  the  mortgage. 

(Continued  on  next  page.) 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  C 


Code:   Jaunt — (Continued) 

The  cash  receipts  arise  from  the  following  sources : 

Dividends $15,000.00 

Interest  on  bonds 18,500.00 

Interest  on  bills  receivable  and  land  contracts 2,400.00 

Net  rentals  after  paying  taxes,  etc 9,000.00 

There  is  a  profit  on  the  Real  Estate  sold  of  $10,000.00. 

The  charges  consist  of  the  following  items : 

Office  expenses  _ $  5,000.00 

Interest  on  bills  payable ~ 4,750.00 

Executors'  fees  allowed  by  court 15,000.00 

The  accrued  interest  on  bonds,  bills  receivable  and  land  con- 
tracts at  the  close  of  the  executor's  term  of  office  is  found  to 
amount  to  $6,100.00. 

Set  up  journal  and  cash  book  entries  and  ledger  account,  and 
prepare  suitable  summarized  statement  of  executor's  transactions 
for  presentation  to  the  beneficiaries. 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  C 


Code  :   Jaunty 


What  is  the  Statute  of  Limitations,  and  within  what  period 
of  time  are  the  following  barred  by  the  Statute  of  Limita- 
tions : 

a.  Open  accouats. 

b.  Promissory  notes. 

c.  Judgments. 

*  «       ♦       *        « 

a.  What  rights  has  the  seller  of  goods  against  the  buyer 
before  delivery  when  the  seller  becomes  aware  of  the  in- 
solvency of  the  buyer? 

b.  What  rights  after  delivery? 

*  *        ♦        *       * 

a.  Who  collects  the  income  tax  in  this  State? 

b.  When  do  returns  have  to  be  made? 

c.  Who  are  affected  and  to  what  extent? 

d.  Who  are  exempt  and  to  what  extent? 

*  ♦        *        ♦        ♦ 
Define  the  following: 

a.  Capital. 

b.  Credit. 

c.  Executor. 

d.  Exchange. 

e.  Receiver. 

f.  Warranty. 

*  *        *        *        * 

a.  What  is  agency? 

b.  How  many  kinds  of  agents  ai  a  there,  and  describe  the 
authority  of  each. 

c.  Under  what  circumstances  can  an  agent  delegate  his» 
power? 

d.  How  is  agency  terminated? 

*  *       ♦       ♦       ♦ 

The  widow  of  a  deceased  partner  receives  a  portion  of 
the  profits  made  in  the  business  in  which  the  deceased  person 
was  a  partner.    Is  she  thereby  constituted  a  partner  in  the 

business,  or  liable  as  such?    Give  reasons  for  your  answer. 

*  *        ♦        ♦        ♦ 

a.  Whrt  is  the  liability  of  the  parties  to  a  certified 
check? 

b.  If  an  assignee  before  distribution  has  notice  of  a 
claim,  but  the  creditor  has  failed,  though  notified  to  do  so, 
to  put  in  proof  of  claim,  may  the  assignee  distribute  the  estate 
without  regard  to  the  claim? 

*  ♦        ♦        ♦        « 

a.  Name  a  variety  of  Municipal  Bonds  and  state  their 
purposes. 

b.  Define  fully  Sinking  Fund  and  set  out  the  purposes 
thereof. 

*  ♦       ♦       *        « 

Can  a  company  be  bound  by  a  contract  entered  into  be- 
fore its  incorporation?    Give  reasons  for  your  answer. 

*  «       «       •       * 

What  books  must  be  kept  by  Commission  Merchants? 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  C 


Code:   Jean 

"B"  dies  March  23,  1905,  leaving  an  estate  consisting  of  the 
following  property  in  charge  of  his  three  executors,  "X,"  "Y" 
and  "Z" : 


Cash  in  bank  

Accounts  receivable  from — 
1    


$  10,000.00 


2 
3 

4 
5 


2,000.00 
3.000.00 
1,000.00 
3,000.00 
1,000.00 


6  4,000.00 

7  2,000.00 

8  3,000.00 

9  4,000.00 

10  1,000.00 


Stocks  and  bonds — 

1     100  shares  Union   Bank   (par  $100) $  12,000.00 

40  shares  Traders'  Bank  (par  $100) 12,000.00 

$  1,000  C  &  O.  4's— J.  &  J 1,050.00 

5,000  P.  R.  R.  6's— M.  &  S 4,500.00 

10,000  N.  Y.  C.  3^'s— J.  &  J. 10,450.00 


$  24,000.00 


2 
3 
4 
5 


$  40,000.00 
And  three  parcels  of  unimproved  real  estate  appraised  at  $14,000.00. 

Three  of  his  heirs  are  also  indebted  to  him  for  money  loaned: 

"C" $    5,000.00 

"D" 6,ooaoo 

"E" 7,000.00 

$  18,000.00 

The  will  directs  the  executors  to  dispose  of  the  real  estate, 
convert  the  other  assets  and  distribute  the  funds,  to  wit : 

Widow  One-half 

f"C"  

"D" !- One-sixth  each 


Children 


"E" 


Up  to  April  30,  190G,  the  executors  collect  all  the  accounts 
receivable  with  the  exception  of  items  No.  3,  No.  6  and  No.  10, 
on  which  they  realized  only  $4500,  the  balance  being  uncollectible. 

Bonds  No.  3  and  No.  5  matured  January  1,  1906,  and  bond 
No.  4  matured  March  1,  1906,  and  were  redeemed  at  par.  Stock 
No.  2  is  sold  at  $325.00  and  stock  No.  1  at  $125.00,  both  sales 
taking  place  on  April  15,  1905. 

The  real  estate  is  sold  for  cash,  $5000.00  and  mortgages 
$10,000.00. 

Interest  has  been  received  on  bank  balances,  $300.00;  accounts 
receivable,  $50.00 ;  and  on  each  of  the  bonds  at  the  regular  interest 
periods  in  full. 

The  executors  pay  decedent's  debts  and  funeral  expenses,  $1000 ; 
counsel  fees,  $500 ;  safe  deposit  box  rent,  $10 ;  and  office  expenses 
incident  to  collection  of  income,  $500.  The  executors  waive  their 
claim  to  comnissions,  but  ask  for  an  allowance  to  cover  expenses 
incurred  by  them  to  $75.00  each. 

State  the  executors'  first  and  final  account  and  prepare  a 
statement  for  the  purpose  of  guiding  the  court  in  directing  a 
distribution  to  be  made  to  the  heirs. 

In  preparing  these  accounts  follow  closely  the  form  you  would 
use  in  actual  practice. 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  C 


Code  :   Jerk 

The  estate  of  John  Smith,  consists  of  securities,  etc.,  appraised 

as  follows: 

Appraised  Value 

$100,000  Wabash  R.  R.  5%  bonds $  125.000.00 

$200,000  Rio  Grande  Rwv.  Co.  4%  bonds 230,000.00 

$200,000  Fort  Wayne  R  R.  5%  bonds 275,000.00 

$400,000  Pittsburgh  Traction  Co.  3%  bonds 400,000.00 

$100,000  Canton  Water  Co.  3^%  bonds 100,000.00 

Accounts  receivable  375,000.00 

Cash  50,000.00 

$1,555,000.00 
.^Iso  rcr.l  estate  appraised  at  $150,000.00,  subject  to  mortgage 
liens  cf  '^lOO.OOO  at  5%. 

The  will  provides  for  legacies  amounting^  to  $100,000  payable 
to  sundry  parties,  and  directs  that  securities  be  set  aside  to  pay 
out  of  the  income  derived  therefrom,  an  annuity  of  $10,000  to  the 
widow,  to  whom  shall  also  be  paid  one-third  of  the  net  income 
from  the  real  estate.  The  income  from  personal  property  is 
made  payable:  one-fourth  to  Maggie  Jones,  one-third  to  Sarah 
Peters  and  the  balance  to  James  Smith.  The  residue  of  the  estate, 
reaj  and  personal,  is  payable  to  the  said  James  Smith  at  the  death 
of  the  widow  and  of  Maggie  Jones  and  Sarah  Peters. 

Five  years  from  the  death  of  decedent,  the  executors'  accounts 
were  as  follows : 

SECURITIES  SET  ASIDE  TO  PAY  ANNUITY  TO  WIDOW 
$200,000  Fort  Wayne  R.  R.  5%  bonds : 

Interest  received  $  35,000.00 

Interest  in  default  15,000.00 

RECEIPTS 

Accounts  receivable,  not  appraised  in  inventory $  17,000.00 

Accounts  rcceiv:.l)le  609^  cf  value,  balance  lost 60,000.00 

.Accounts  receivable  en  account  175,000.00 

Interest  en  securities  177,500.00 

Rental  of  real  estate  127,000.00 

PAYMENTS 

Repairs,  taxes,  etc.,  on  real  estate  $  22,000.00 

Betterments  to  real  estate  16,000.00 

Decedent's   debts   75,000.00 

Widow  (on  account  of  annuity)  35,000.00 

Widow  (on  account  of  real  estate  income) 6.000.00 

Maggie  Jones 15,000.00 

Sarah  Peters  18,000.00 

James  Smith  (on  account  of  personal  property  income) 20,000.00 

James  Smith  (on  account  of  real  estate  income) 10,000.00 

Executors  (on  account  commissions  @  5%)  on  principal  account  25,000.00 

Expenses  of  administration  3,000.00 

Incumbrances  on  real  estate  and  $23,000  interest 123,000.00 

Prepare  Orphans'  Court  account  with  distribution  account 
attached. 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  C 


Code :   Jersey 

The  estate  of  Hiram  West,  of  which  you  are  appointed  ad- 
ministrator, is  appraised  as  follows  on  January  10,  1913: 

Shares  of  First  National  Bank $100,000.00 

500— par  $100.00  value. 

Share's  of  United  Mercantile  Co 6,000.00 

60— par  $100.00  value. 

Bonds  of  Southern  Lumber  Corporation 4,500.00 

5— par  $1,000.00  value. 
Real  Estate — 

Residence,  168  F  Street 5,500.00 

Vacant  2  Lots,  E  Street 2,000.00 

Cash  on  person  82.00 

Cash  in  Bank— Savings  Account $6,220.00 

Accrued  Interest 31.10      6,251.10 

Household  Furniture,  Jewelry,  etc.,  as  per  Schedule      1,000.00 
Automobile  500.00 


$125,833.10 
The  following  transactions  appear  from  your  Cash  Book: 


Jan. 
Feb. 
Feb. 
Mar. 

May 

June 

June 

July 

Aug. 

Aug. 

Sept. 

Nov. 
Dec. 
Dec. 


Receipts 
1913 

10    Balance  $ 

First  Nat.  Bk.  Div. 
United  Mer.  Co.  Div. 
Southern   Lmbr.   Co. 

Int 

First  Nat.   Bk.   Div. 

15    Savings  Acct.  Int 

15  Sale  of  Residence.... 
First  Nat.  Bk.  Div. 
United  Mer.  Co.  Div. 
First  Nat.  Bk.  Div. 
Southern   Lmbr.   Co. 

Int 

First  Nat.  Bk.  Div. 
Savings  Acct.  Int 


1 
2 
1 

10 


10 
% 

10 

1 

10 
15 


15   Sale  lots. 


Jan. 
Jan. 

20 

82.00 

28 

2,000.00 

300.00 

300.00 

2,000.00 

83.30 

6,500.00 

2,000.00 

300.00 

2,000.00 

300.00 

Feb. 

28 

2,000.00 

Mar. 

31 

83.30 

Apr. 

30 

1,800.00 

May 

31 

June 

15 

June 

30 

July 

31 

Aug. 

31 

Sept. 

31 

Oct. 

30 

Nov. 

30 

Dec. 

15 

Dec.    31 


Disbursements 

Letters  Test'y 

Claims  allowed: 

Groceries    

Gas    Bill _-... 

Widow's    Allowance, 

January    

Coal  _ 

Funeral    Expenses.... 

Physician    

Funeral  Notice 

Commissions    

Administrator's 

Bond   

Widow's  Allowance.. 
Widow's  Allowance.. 
Widow's  Allowance.. 
Widow's  Allowance.. 
Commissions  on  sale 

of   Property.. 

Legal  Expenses 

Widow's  Allowance.. 
Widow's  Allowance.. 
Widow's  Allowance.. 
Widow's  Allowance- 
Widow's  Allowance.. 
Widow's  Allowance.. 
Commission    Sale  of 

Lots  

Widow's  Allowance.. 
Balance  


$ 


1.00 

26.00 
3.80 

150.00 
83.00 
350.00 
200.00 
3.20 
150.00 

25.00 
150.00 
150.00 
150.00 
150.00 

195.00 
180.00 
150.00 
150.00 
150.00 
150.00 
150.00 
150.00 

90.00 

150.00 

16,642.60 


$19,748.60 


$19,748.60 


Prepare  first  and  final  account,  and  arrange  a  division  among 
three  heirs  in  equal  amounts. 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  C 


Code  :    Jess 

What  is  meant  by  "Balance  Account"  under 
the  theory  of  double  entry?  How  was  the  ac- 
count used  originally?  What  has  become  of  it 
in  modern  bookkeeping  practice  ? 

*  *     *     ♦     ♦ 

Assume  that  the  private  ledger  of  a  trading 
copartnership  contains:  the  capital  assets  and 
liabilities,  the  partners'  accounts,  the  Proht  and 
Loss  account,  and  the  Notes  Payable  account. 
State  the  procedure  for  closing  the  general 
ledger,  laying  particular  stress  on  the  disposi- 
tion of  the  working  and  trading  assets,  and  the 
cash  transactions  affecting  the  capital  assets 
and  liabilities. 

***** 
The  stockholders  of  a  corj)oration  authorize 
an  issue  of  $1,000,000  of  bonds;  $500,000  of 
these  bonds,  duly  registered  and  certified  by 
the  trustee,  were  returned  to  the  corporation 
and  disposed  of  as  follows: 

Ihe  corporation  sold  $200,000  for  cash 
pledged  $200,000  as  collateral  security  for 
the  payment  of  its  notes,  and  retained 

^     *    *    *     * 
How  should  this  issue  of  bonds  appear  on 
the  balance  sheet  of  the  corporation  ? 

*  *    *    »    ♦ 

Explain  the  method  of  quoting  French  ex- 


change in  New  York,  also  the  following  phrase 

used  in  a  certain  work  on  foreign  exchange: 

*  1  he  higher  the  rate,  the  lower  the  quotation." 

***** 

The  Bay  Side  Building  and  Loan  Associa- 
tion, whose  monthly  dues  were  $1  per  share, 
had  three  series  of  shares  in  force  at  the  end 
of  the  third  year ;  the  number  of  shares  in  each 
series  and  the  value  per  share  were  as  follows : 
First  series,  500  shares,  value  per  share,  $38.87 
Second  series,  600  shares,  value  per  share,  25.27 
I  bird  series,  400  shares,  value  per  share,    12.32 

A  fourth  series  of  500  shares  was  issued  at 
the  end  of  the  third  year.  The  net  profits  for 
tiie  fourth  year  were  $3,000  and  the  total  profits 
for  the  four  years  were  $5,325. 

Prepare  a  statement  showing  the  value  of  a 
share  at  the  end  of  the  fourth  year,  in  each 
series,  and  explain  your  method  of  procedure. 

An  inv  estment  bond  house  purchased  10  New 

***** 

Jersey  Traction  Company  first  mortgage  5% 
bonds  at  SS'A ;  10  New  Orleans  Gas  Light  and 
Power  Company  first  mortgage  5%  bonds  at 
1.04  (accrued  interest  not  to  be  considered). 
Prepare  the  necessary  entries  to  record  prop- 
erly these  transactions  on  the  books  of  the 
bond  house  and  to  facilitate  an  audit 


PRACTICAL  PROBLEMS,  GRADED,  SERIES  C 


Code :    Jest 

The  duly  appraised  inventory  of  the  estate  of  John  Smith,  who 
died  August  31,  1918,  was  filed  by  the  executor  on  October  1, 
1918.    The  items  were  as  follows : 

PROPERTY. 

Real  Estate  and  Buildings $150,000 

Corporation  Stocks  10,000 

Corporation  Bonds  . 25,000 

Rents  due  from  the  tenants  for  August 1,500 

Cash  on  Deposit  in  checking  account 3,000 

Accrued  interest  on  Corporation  Bonds 500 

Rents  due  from  tenants  for  .September 2,000 

Notes  Receivable  16,000 

(a)  one  year  note  dated  June  1,  1918, 

int.  at  6%  payable  quarterly,  $5,000. 

(b)  one  six  months  note  dated  July  15,  1918, 

int.  at  6%  payable  at  maturity,  $3,000. 

(c)  one  three  months  note  dated  August  1,  1918, 

with  interest  at  6%,  $8,000. 

Homestead 10,000 

Personal  property  (jewelry,  automobile,  etc.) 3,500 

Total $221,500 

DEBTS 
Real  Estate  and  note  secured  by  mortgage  on  buildings,  given 

July  1,  1917.     Interest  at  6%  is  payable  semi-annually $  25,000 

Unpaid   Funeral   expenses  750 

Sundry  Personal  Debts  1,200 

Total „ $  26,950 

The  executor  engages  you  to  determine  the  net  income  of  the 
estate  from  the  following  transactions  which  appear  properly  re- 
corded upon  the  ledger : 

1.  50  shares  of  stock  par  $100  inventoried  at  105,  were  sold  at 
110. 

2.  50  shares  of  stock  par  $100  inventoried  at  50,  were  sold 
at  50. 

3.  50  shares  of  stock  of  no  par  value  inventoried  at  83,  sold 
at  93, 

4.  Net  rent  collected  from  tenants,  including  those  stated  in 
the  inventory,  and  after  paying  taxes,  $13,500. 

5.  Interest  received  from  bonds  while  owned  $750. 

6.  Bonds  were  all  disposed  of  for  $27,500,  which  included  ac- 
crued interest  of  $350. 

7.  Real  estate  inventoried  at  $30,000  was  sold  for  $33,000  and 
on  January  1,  1919,  the  note  secured  by  the  mortgage  on  real 
estate  was  duly  paid  with  interest  to  date. 

8.  The  funeral  expenses  and  the  sundry  personal  debts  of  Smith 
were  paid. 

9.  The  executor  was  paid  a  salary  of  $3,600  during  the  period, 
and  office  expenses  amounted  to  $5,000. 

10.  Dividends  were  received  from  stocks  while  owned,  amount- 
ing to  $350. 

11.  Taxes,  repairs  and  general  expenses  of  the  homestead  were 
paid  in  cash,  $3,000. 

12.  Taxes  on  unimproved  real  estate  amounted  to  $125. 

13.  The  principal  and  interest  of  all  the  notes  receivable  were 
paid  when  due. 

What  original  papers  or  records  would  you  expect  to  find  sup- 
porting the  facts  recorded  above  which  you  jkvould  accept  as  satis- 
factory proof  of  the  transactions? 


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